When you think about how people respond to incentives, first consider the size of the incentive. Otherwise you'd be forced to conclude that, say, a $10,000 fine wouldn't work either, which is plainly absurd.
There's also the matter of who's imposing the fine. For the day care, imposing a fine negated the social incentive not to be late because the parents saw themselves as adhering to the contract the day-care set up. Conversely, the entrepreneur didn't set up such a 'contract' between him or herself and AH, so there's no understanding that it's ok to be late if you pay the fine.
Should I, or anyone else, be fined for that?
I apologized when I arrived (and e-mailed as I could beforehand) because it's rude to be late for a meeting with people you are in business with, regardless of whatever monetary incentives someone wants to arbitrarily hang on that.
If you need a fine system to make that work, I'd argue you have deeper problems, problems that money isn't going to do much to solve.
If you had been made aware, in advance, that there was a fine, then sure, you should be fined for being tardy.
Are you pattern-matching on "VC", "lateness", "fine", and your own negative feelings regarding having been late to a VC meeting?
Your reaction to this story (VC firm trying to show that it values potential investment targets' time) is like someone worrying that, since a pizzeria has a policy of not charging customers for a pizza if it's delivered late, you're going to have to provide the delivery person with a free sandwich if you don't get to the door quickly enough after he rings the bell.
It's a bad idea.
It was social norms that kept the parents picking up the kids on time consistently. Adding a small cost switched the parents from social norms mode to market norms mode. Instead of the parents thinking "oh no, I better hurry now, because it's wrong to be late" as was the case when lateness was free, it became a "is it worth $3 to be 10 minutes late?" calculation.
Replacing social norms with a poorly chosen market rate is dangerous and can potentially backfire. Essentially, there is a discontinuity in people's behavior between a cost of $0, where you benefit from social norms, and a cost of epsilon, where the social norms go out the window. If you actually charge people the cost they are inflicting on you for lateness, then it's again a different story.
I'm not clear what you thought I misunderstood here.
It'll allow a false sense of entitlement; "I'm paying for it, so it's now ok to arrive late to pick up my child. It's my right".
A fine that was high enough to cause financial harm would surely have other unanticipated effects.
E.g, http://www.wallstreetoasis.com/salary/venture-capital-compen... lists 'analysts' and 'associates' at between 80 and 250k. Not the kind of money to light cigars with 20 dollar bills (certainly not in NYC).
A fine high enough to hurt financially the person breaking the rules is one option (that's what governments usually do). Other good option is public embarrassment. I used the $1 fine for people late to meetings, but we also counted the number of times each one was fined, so there was an extra incentive to avoid.
"I've paid my dollar, so what if I'm late?" (As mentioned in that pop-economics book about the parents and the nursery.)
Except.. this doesn't actually work.
http://www.nytimes.com/2005/05/15/books/chapters/0515-1st-le...
> The economists decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel. The study lasted twenty weeks, but the fine was not introduced immediately. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident. The fee would be added to the parents' monthly bill, which was roughly $380.
> After the fine was enacted, the number of late pickups promptly went ... up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.