First, a definition. Gaming the system in this section refers to finding ways to take advantage of a system of rules and regulations for personal benefit, that weren’t intended by the designers of the rules and regulations, or the community members that supported putting the rules and regulations in place. Exploiting a loophole is one way of gaming the system. Loophole exploiting is legal, but the system gaming can be illegal as well. If the person doing it doesn’t get caught and stopped… why not?
A person who discovers a way to game a system usually experiences a surge of pleasure at the discovery. They can then exploit their discovery quietly or brag about it to gain some social pleasure as well as personal satisfaction and economic benefit. An example among kids is one child getting rewarded for being the teacher's pet, much to the admiration of some class members and outrage of others. If that child sticks his or her tongue out at those who are outraged, he or she is also bragging.
A real-world example of a loophole creating outrage that has flared up in 2014 as this book is being written is “tax inversions” among corporations. This is a legal way for a corporation to reduce its tax burden by moving the headquarters out of the US into a country with a lower tax rate. It is legal but it has created a political and media storm of outrage in the summer of 2014, and it is an example of gaming the system.
System gaming creates good feelings in those who discover how to do it, admiration in those who think it is clever, and outrage in those who feel the system is being exploited unfairly. It can also create lots of waste because these practices are distracting from the big goal of making our lives better, they make cooperation harder, and over time they become rituals. The hard problem to solve is: Who defines what is gaming the system? This depends a lot on perspective and circumstance.
Rules and regulations are designed to stop people from partaking in a particular activity. For example if a person wants to smoke indoors, but many community members don’t want that to happen, the community passes a regulation against smoking indoors. A regulation is needed when the activity is a popular one. There is no need for a regulation saying people shouldn’t sprint around in a room with a bucket on their head because that isn’t a popular activity.
As soon as a rule or regulation is made, the people adversely affected by it, those who want to continue doing the activity, are going to look for ways to get around it. The more often the rule intrudes, the more unfair or silly it seems, the more expensive it is, the more lost opportunity it causes, the more vigorous the search will be for ways around it. The people most likely to first discover ways around rules and regulation are the clever and amoral - these people are heads-up and less likely to be concerned about the rule's intent.
Here are two examples of places where this contest between intent and loopholes is regularly played out:
In addition to good rules and regulations, good vigilance is needed by those who make the rules and regulations. This vigilance is needed because the world isn't ideal, and it changes from day to day in ways that cannot always be foreseen by the people who create the rules and regulations.
Let's look at the above examples and see how they can be perverted (“gamed”) if the rule makers don't stay vigilant.
An example from “war stories” I overheard while working at Novell: A particular factory general manager had a compensation plan that rewarded him for keeping his factory operating at high capacity. This was a good intention as it encouraged reducing the waste of idle machines. But the surprise twist was it meant the general manager sometimes discouraged projects that built the plant's capacity. He did so because each time that happened the percent utilized would decline and so would his pay. This part of his compensation was encouraging him to keep things the same. If “maintaining status quo” was not the intent of the company, the compensation rule writers needed to change this part of the manager’s compensation package.
When a train crew is operating a 19th century steam-powered locomotive (the kind you see in western movies), the work load is quite different than it is for a 21st century diesel-powered locomotive (the kind you see on railroads today). If the work rules aren't updated as technology changes the rules become silly. If the unchanged rules mean people are being paid to mostly stand around, the rules pick up the nickname “feather bedding” by those in the industry. An example is a rule that requires hiring a “fireman”, someone who puts coal into a steam-powered locomotive boiler, when the locomotive is diesel powered. The fireman has nothing to do. Featherbedding is waste. It is raising prices to customers and disenfranchising to those who are actually doing the real work - they are watching these people get paid to goof off!
These are examples of how easily system gaming can slip into any rules and regulations environment. That's the problem. What are some “big picture” ways of reducing system gaming?
“We're all on the same team, and it's a good one to be on. We are going to rock the world!”
Feeling this is feeling enfranchised. The more a person is feeling enfranchised the less they will be interested in searching for loopholes. They will be happier and the people around them won't be outraged by the loopholes they have discovered and are exploiting because they won’t spend time and effort looking for them.
Building enfranchisement and helping the community buy into The Big Goal are the key roles for community leaders. When rules and regulations can help these two functions happen, they are useful. However, if the rules and regulations are mostly about prescribing and micromanaging, they aren’t helpful. Instead they are providing fertile ground for system gaming, which isn’t helping at all. System gaming is helping grow waste and disenfranchise those who can’t participate.
Micromanaging invites system gaming. When there are lots of “if’s”, “and’s”, and “but’s” to navigate, lots of loopholes become possible. This is particularly true when enfranchisement feeling is low. The rules should be as simple as possible and as much about providing a level, well understood, playing field as possible. They should be about goals, not about how to get to the goals. The US Constitution is a good example of a simple document.
Transparency is when a law or regulation is open for public inspection and when the law or regulation is easily understood by the public. The converse is when a law or regulation is long winded, filled with jargon and hard to understand, or outright withheld from public scrutiny. Then it is murky. The iconic example of murky legislation in the 2010’s is the roughly nine hundred page Affordable Care Act (ACA/Obamacare), which came along with House Speaker Nancy Pelosi’s famous remark, “We have to pass the bill so that you can find out what is in it”. Transparency is closely tied to the level, well understood, playing field mentioned above. It also means that cooperating is much easier and can happen more quickly. And it means that if loopholes are discovered, word of them, and corrections spread quickly.
Yes, the real world is full of surprises. This means that those in charge of the rules must be constantly prepared to adjust them to surprises. If the rule makers are being vigilant, are paying attention to the consequences of what they have created, the community response will let them know when changes are needed.
A word of caution: How the adjustments are made should not be capricious. If a rule is “this way” one day, and “that way” the next day without apparent rhyme or reason, that is discouraging and disenfranchising. Why changes are made must be as transparent as the playing field.
Populist politicians and other populist leaders are popular for a reason: They allow lots of supporters to game the governing system they are running. They are using system gaming as a political pacifier. This tactic was called “Bread and Circuses” in Ancient Rome. The populist politicians of that era handed out free bread and coliseum tickets to their supporters. They and their supporters were gaming the system. Sadly, this is a powerful tool at the emotional level. The sad part is because it is so wasteful of resources. These system gaming people aren’t earning what they get, and what they are getting isn’t being used to make the system work better. The nation of Venezuela is now going through a deep economic crisis because the previous leader, Hugo Chávez, gained a lot of support by letting his followers game Venezuela’s economic system for fifteen years.
System gaming provides a lot of warm fuzzies to those participating in the activity, so it is a popular activity in many human endeavors. It happens when people discover a loophole in a regulation system and exploit it, or when they discover that they can get away with outright fraud. It ends when the regulators are vigilant and change the regulations, or get diligent about enforcing them.
Building enfranchisement is a key way to reduce system gaming. The more people feel they are an important part of a team that is doing important things, the less likely they are to look for ways to game it.