# The Company Invented a Policy That Defeats Itself, So This Guy Read It

Here is a model of corporate incentive design: The firm wants employees to use their vacation days (good for morale, prevents burnout, also clears the books for accounting purposes). The firm also wants no one taking vacation at once (bad for operations). The firm therefore issues a mandate: use your PTO by month-end, or lose it forever. The manager, receiving this memo, announces in standup that no one can actually take time off due to project deadlines. Congratulations: you have constructed a policy that is logically impossible to follow.

Our hero—let’s call him a man who reads—noticed this and consulted the employee handbook. It contained a provision, apparently, that if the company denies you time off due to operational necessity, they owe you a payout instead of forfeiture. The model was now complete. The firm had created an incentive to not approve vacation, which created an incentive to deny vacation, which triggered a clause that said you have to pay them anyway. This is what we call “a policy with a built-in penalty for following your own policy,” and it is, from a pure incentive-design standpoint, a small masterpiece of unforced error.

One commenter noted, reasonably, that the whole thing is “when manager stupidity meets company policies, the results are always incredibly funny.” This is generous. It is not stupidity so much as the collision of two separate, sincere intentions that were never stress-tested in the same room. HR wants compliance with labor law. Operations wants the project shipped. Neither wants to pay out unused vacation. The system tried to satisfy all three and instead created a closed loop where the only winning move was to read the fine print and politely invoke it.

The beautiful part is what happens next: our hero takes the time off anyway—not as a rebel, but as someone executing the policy as written. The manager cannot deny it without triggering the payout clause. The company gets the vacation coverage it feared and the payout it wanted to avoid. Everyone is worse off except the employee, who gets paid vacation or actual vacation, depending on how you model it. [This is sometimes called “malicious compliance,” a term that flatters the employee and gently insults the system.]

The lesson is not that one guy outwitted his company. It is that when you stack rules without checking whether they cohere, you create a machine that runs perfectly in the direction you didn’t intend. Somewhere in an HR office, someone is reading this and adding a new clause to plug the loophole, which will create two more. This is how policy works: it is always one step behind the people trying to follow it honestly.