We like to believe our decisions are our own—that we act out of free will, guided by our internal values. But, whether we realize it or not, much of our behavior is quietly shaped by the systems we live in. These systems, designed with a mix of intention and inertia, use influence and incentives to nudge us toward certain choices.
From how we tip at restaurants to how we see sales tax, the structures around us constantly push and pull on our motivations, aspirations, and beliefs. Understanding these forces is crucial—not just for navigating the world but for designing solutions that solve the challenges we face.
Influence: The Subtle Power of Systems
Influence is everywhere, woven into the fabric of our everyday lives. Yet, it often goes unnoticed. It works through design—whether intentional or not—by framing our choices, shaping how we see the world, and steering us in directions that feel natural or inevitable. These influences don’t announce themselves; they quietly shape our decisions, one interaction at a time.
Take tipping culture in the U.S. It’s more than just a social norm; it’s a system deeply rooted in service worker pay and labor laws. Federal law allows tipped workers to be paid below the minimum wage, with the expectation that tips will make up the difference. This creates a sense of obligation for customers to tip, transforming what could be a choice into a necessity. Now compare this to Japan, where tipping is virtually unheard of. Instead of relying on gratuities, the system ensures dignity and fairness by embedding proper wages into the cost of service. In Japan, exceptional service is not something you reward—it’s the baseline expectation.
Even something as mundane as sales tax reflects deliberate influence. In the U.S., sales tax is added at checkout, making it an ever-present reminder of government involvement in every transaction. The visibility of the tax creates a subtle friction and reinforces individual accountability for government funding. Contrast this with Europe or the UAE, where VAT (value-added tax) is included in the price you see. There, the tax is invisible at the point of purchase, simplifying transactions and removing the psychological burden of additional costs. These differences in presentation are not accidental—they’re reflections of distinct societal priorities and design choices about what citizens should notice and when.
Broader Examples of Influence in Everyday Design
- Healthcare Systems:
In countries like the U.S., the fragmented healthcare system pushes individuals to think about coverage, copays, and deductibles. This framing shifts the burden of responsibility onto the individual, reinforcing a culture of consumer choice. In contrast, countries with universal healthcare systems, like the UK’s NHS, embed health as a public good, framing it as a shared societal responsibility rather than a personal burden. - Public Transportation:
In Copenhagen, public transit and bike lanes are designed to prioritize efficiency and sustainability, encouraging people to bike or take the metro. Meanwhile, in cities like Los Angeles, the dominance of car-centric infrastructure nudges people toward driving. These systems influence daily behaviors through design, shaping not just individual decisions but entire cultures around mobility. - Default Settings in Tech:
Behavioral economist Richard Thaler, in his book Nudge, highlights how default settings are a powerful tool of influence. Consider email notifications: most platforms default to sending notifications for every interaction, encouraging frequent engagement. Conversely, platforms that allow users to opt out or customize notifications nudge toward a healthier digital experience.
Cultural Design of Influence
Even broader cultural practices are examples of systemic influence. For instance:
- Recycling in Germany: The country’s bottle deposit system, “Pfand,” embeds a sense of environmental responsibility by rewarding recycling with monetary incentives. This system has influenced cultural norms to the point where not recycling is socially frowned upon.
- Work-Life Balance in Nordic Countries: Policies like paid parental leave and shorter workweeks influence how citizens view work, prioritizing quality of life over hustle culture. This is a sharp contrast to countries where long hours are celebrated as a badge of honor.
What We Can Learn from These Systems of Influence
These examples of influence, subtle or overt, reveal a deeper truth: systems are not neutral. They are designed with particular goals in mind, whether that’s incentivizing consumer behavior, reinforcing cultural values, or shaping societal expectations. The choices we encounter—and the ways they are framed—are not accidental. They reflect the priorities of those who design them.
When we start to recognize these invisible forces, we gain the power to question them. Why are wages structured to depend on tipping? Why are taxes visible in some places and hidden in others? And, perhaps most importantly, how can we design systems that influence us toward better outcomes—ones that align with the values we want to uphold as a society?
This understanding isn’t just academic. It’s the foundation for rethinking and redesigning the systems that shape our lives, from the way we work to how we build sustainable communities. Influence is subtle, but when harnessed with intention, it can create powerful, lasting change.
Incentives: The Levers of Motivation
If influence is the subtle, behind-the-scenes guide shaping our behavior, incentives are the loudspeaker, amplifying specific actions and outcomes. Incentives—whether monetary, social, or emotional—are tools used to align individual behavior with the goals of a system. At their best, incentives create harmony between personal and collective benefits. At their worst, they distort behaviors, often with unintended consequences.
Examples of Effective Incentives
- Loyalty Programs:
One of the most familiar examples of incentives is the loyalty program. Airlines like Delta or supermarkets like Tesco use points and perks to encourage repeat purchases, turning customer loyalty into a tangible reward. These programs subtly nudge customers to stay within the ecosystem, creating a sense of loss if they switch providers and lose accrued benefits. - Policy Incentives:
Governments often use policy incentives to shape behavior at scale. Congestion charges in cities like London are designed to reduce traffic and pollution by charging drivers during peak hours. Similarly, subsidies for renewable energy projects or tax credits for buying electric vehicles align individual financial motivations with environmental goals. - Public Health Incentives:
During the COVID-19 pandemic, governments worldwide used incentives to promote vaccinations. In the U.S., some states offered cash prizes, free rides, or even scholarships to boost participation. These tangible rewards were designed to overcome hesitancy by tying immediate benefits to long-term societal health.
The Danger of Perverse Incentives
But not all incentives lead to positive outcomes. Misaligned incentives can backfire, encouraging behavior that undermines the very goals they were designed to achieve.
- Corporate Missteps:
The Wells Fargo scandal is a textbook example. To drive revenue, employees were incentivized to meet aggressive sales quotas, leading to unethical practices like creating fake accounts. The system rewarded behaviors that ultimately damaged the company’s reputation and customer trust. - Healthcare Incentives:
In fee-for-service healthcare systems, doctors and hospitals are incentivized to perform more procedures rather than improve outcomes. This creates a dynamic where the volume of care, not its quality, drives financial gain, sometimes leading to overtreatment or unnecessary interventions. - Environmental Policy Pitfalls:
In environmental policy, poorly designed incentives can lead to “gaming the system.” For instance, Europe’s carbon credit market faced criticism for allowing companies to purchase offsets without meaningfully reducing emissions. Such loopholes distort the intended impact of the policy.
The Psychology of Incentives
Psychological insights reveal why incentives are so powerful. Behavioral economist Dan Ariely, in Predictably Irrational, explains how rewards (or the absence of them) tap into deep emotional and cognitive drivers. For example, incentives that feel achievable—like earning a free coffee after ten purchases—motivate us because they create a sense of progress and fairness.
However, Ariely also warns that extrinsic incentives (like money) can crowd out intrinsic motivation. A famous study in Israel showed that introducing a fine for late pickups at daycare centers led to more parents arriving late because they now felt they were paying for the service. The incentive shifted the moral equation, turning lateness into a transaction.
Incentives as Tools for Change
When designed thoughtfully, incentives can align human motivation with collective goals. For example:
- Recycling Incentives: Programs like Germany’s “Pfand” deposit-return system encourage recycling by offering small refunds for returning bottles.
- Behavioral Nudges: In Sweden, the “Speed Camera Lottery” rewarded drivers who obeyed speed limits by entering them into a lottery funded by fines from speeding drivers. This clever incentive improved compliance by making following the rules feel rewarding, not punitive.
At their best, incentives work because they make the desired behavior easier, more rewarding, or more socially acceptable. They tap into our innate desire for progress, fairness, and belonging. But when they fail—through misalignment, poor design, or unintended consequences—they can undermine trust and distort entire systems.
This delicate balance underscores the need for systemic thinking: incentives can’t be viewed in isolation. Their effectiveness depends on how they interact with the broader system of influence and structures they’re meant to support.
At their best, incentives align human motivation with broader benefits.
At their worst, they distort the system entirely.
The Interplay of Influence and Incentives
Influence and incentives don’t work in isolation; they amplify each other. Influence shapes how we perceive incentives, and incentives create feedback loops that reinforce systems of influence.
Take homeownership in the U.S. The cultural narrative of the “American Dream” tells us that owning a home is a key milestone in life. That influence is backed by tax incentives, like the mortgage interest deduction, which make buying a home more financially appealing. Together, they create a system where renting feels like failure, even if it’s the better financial choice for some.
Or consider the role of algorithms in tech. Social media platforms use influence—personalized feeds—and incentives—dopamine hits from likes and shares—to keep us engaged. These systems are so effective that they’ve become the default way we interact with the world online.
W. Edwards Deming said it best: “Every system is perfectly designed to get the results it gets.”
The systems we live in are producing exactly the behaviors they’re designed to encourage. If we want different results, we need to change the design.
The Philosophical Lens: Influence, Blame, and Systemic Thinking
Our view of the world is shaped by a mix of long-term and short-term influences—parents, society, culture, and immediate experiences. These layers of influence form the lens through which we interpret everything, from personal challenges to societal failures. When something doesn’t work, our first instinct is often to place blame. We might point to the government for overregulating or underregulating, to corporations for being exploitative, or to individuals for being apathetic. But more often than not, what we’re reacting to is a symptom of a broader systemic issue.
Systems are complex, interconnected webs with many levers and mechanisms. Focusing on a single lever—like government policy, corporate practices, or cultural norms—often polarizes the conversation. This is why debates over topics like climate change, healthcare, or economic inequality become so divisive: they get stuck in the weeds, reducing multifaceted problems to binary arguments.
But systems don’t fail or succeed based on one lever. They evolve based on the interaction of all their components. To preserve or improve the systems we rely on, we need to act on multiple levers at once. Polarization distracts us from the bigger picture—how influence and incentives work together to shape outcomes.
Those who understand this dynamic—and wield the power to influence and incentivize holistically—are the ones designing the next iteration of our systems. This is why understanding influence and incentives is not just about improving individual outcomes; it’s about steering the evolution of entire systems.
Yet, no matter who holds power, one constant remains: the perception that the system isn’t working. It’s either doing too much or not enough. This dissatisfaction, though frustrating, holds a key insight—it’s a reminder that systems are not static. They can and must be improved. The challenge is to think systemically, beyond blame, and act with the broader picture in mind.
Designing Solutions with Influence and Incentives
So what does all this mean for creating solutions? It means we need to design with human behavior in mind. Understanding how influence and incentives work allows us to align them with the outcomes we want.
- Climate Solutions: Adoption of electric vehicles didn’t take off until governments combined influence, marketing the benefits of EVs as well as early EV incentives (tax credits and subsidies/loans). Beyond the US, but also Norway.
- Public Health: Policies like plain packaging for cigarettes or calorie counts on menus use both influence (shifting perception) and incentives (financial penalties or rewards) to change behavior.
- Business Models: Companies like Tesla have thrived by creating products that people desire (influence) while leveraging subsidies and carbon credits (incentives) to fund their growth.
Designing solutions isn’t about manipulating people; it’s about understanding how they already behave and aligning systems to support better choices.
I’ll be writing a few example concept ideas (will aim to link them all here below), as part of a I&I Series.
Conclusion
Influence and incentives aren’t abstract concepts—they’re the invisible drivers of our decisions, shaping everything from our small daily actions to our big life goals. If we want to solve the challenges ahead—climate change, inequality, public health—we need to stop fighting against human behavior and start designing systems that work with it.
The good news? These forces are already at play. The better we understand them, the more we can use them to nudge humanity toward progress.
The systems we build today will influence and incentivize the future we live in tomorrow.
