As a curious soul, I invariably end up asking numerous questions. This book helped me ask the right ones. Here is a summary:
1. Central Idea: If morality is HOW people would like the world to work, economics show us how it ACTUALLY works
2. Conventional wisdom is often wrong because we fail to ask what and how to measure. For example, a steep reduction in crime in NY in the ’90s was attributed to increased policing, stringent laws and better policy making. But nobody asked the most important questions: Where did these criminals go? The answer lies in a judgment from 20 years ago, when abortion was legalized. Earlier, most of these criminals’ parents couldn’t take good care of them and let the kids fend for themselves. This made them turn to crime. But there were fewer such births from 1970 onwards. In turn, the ’90s were safer
3. Incentives are everything. To crack the code, find the right incentive. A day care center imposed fines on parents who came in late. It suddenly saw a spike in late-comers. Why? Because money wasn’t the right incentive, in fact, parents thought it was a great deal. Naming and shaming these parents on a white board was what eventually worked
4. Causality and indication are two different things. Data revealed that kids who had a library in their house outperformed other kids. So, should all parents set up home libraries? No. Libraries were INDICATORS. What CAUSED these libraries to exist was the fact that these parents were educated. So, if you want your child to have a bright future, you’re better off focusing on it as a teenager than as a parent. 50% of the job is done by our genes
5. Only 90% of gift cards in the US are ever redeemed. Why do we still give gift cards? Well, grandparents don’t (42% give cash) but partners do (>90%). Despite the fact that a cash gift is 50% more valuable (think about the last time you got something you didn’t like). Why? Sentiments. Effort. Significance of certain gestures. It all counts.
In essence, ask the right questions to find causality and to get to the crux of the matter. Both, in your personal and professional lives, changing these incentives can lead to incredible outcomes.