The news is full of Wells Fargo’s follies since they got hit with fines totaling $185 million last week. What happened was a case of management by measurement. Wells Fargo employees were heavily pressured – including threats of job loss – to rack up customer “solutions,” which translate into selling additional services to the bank’s customers that included additional bank accounts and bank credit cards. In order to meet the strict quotas that management had imposed, employees opened accounts for customers without first receiving customers’ permission or informing them.

Though this practice was widespread (some 5,300 Wells Fargo employees have been fired since 2011 for opening fake accounts), it does not appear to have been the result of a conspiracy. Rather, it was an example of spontaneous order that emerged from employees acting in their own best interests — in this case, reducing the pain of management pressure — given the incentives and constraints imposed by the system. In an article appearing on Bloomberg, Matt Levine explains how this sort of thing happens:

Two basic principles of management, and regulation, and life, are: