Scientific Definition
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Plain-English Definition
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Feynman Explanation
Bonus structures and long-term risk run on different calendars.
Core Principle
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Mechanisms
Pending editorial review.
Annual bonuses reward annual results — risk that blows up in year four with damage in year seven is rational.
Pending editorial review.
Pending editorial review.
Compensation cadence shapes risk-taking cadence.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
Bonus structures and long-term risk run on different calendars.
Examples
- Trading desks rewarded for asymmetric bets.
- Compensation cadence shapes risk-taking cadence.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Multi-year deferred comp tied to long-term outcomes.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Multi-year deferred comp tied to long-term outcomes.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
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Quarterly earnings drive quarterly behavior.
Percentage-of-AUM fees reward gathering assets regardless of net performance.
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EPS-targeted comp incentivizes buybacks even when reinvestment yields more.
Once-a-year feedback rewards once-a-year behavior.
Narrowly tied bonuses get gamed; people optimize the metric, not the underlying goal.
Candidates dependent on large donors become structurally responsive to donor priorities over voter priorities.