Lessons Learned

• Employees will always strive to maximize their own welfare, not yours.

• Paying employees based on their achievements maximizes their incentive to work but forces employees to take on lots of risk.

• Ideally you should compensate employees based on effort, not outcome; but effort is much harder to measure than achievement.

• Paying employees based on the performance of a large group creates incentives for workers to free ride on the efforts of others.

• Two people, or countries, can benefit from trade even if one is better at everything than the other.