1 00:00:01,262 --> 00:00:11,832 So, imagine that you are a 24-year old guy, you're going on a date. 2 00:00:11,832 --> 00:00:15,210 You've gone to dinner , you had a couple of drinks. 3 00:00:15,210 --> 00:00:21,079 You're walking with your potential date, potential long term date to her apartment. 4 00:00:21,080 --> 00:00:28,243 You walk up the steps and as you lean to kiss her, hoping for a passionate 5 00:00:28,243 --> 00:00:34,031 goodnight kiss. You tell her, interesting, interestingly I 6 00:00:34,031 --> 00:00:38,829 spent $124 on the date so far. How will that date works? 7 00:00:38,829 --> 00:00:42,366 I mean, would you actually get the goodnight passionate kiss? 8 00:00:42,366 --> 00:00:46,641 I'm not proposing this experiment. I'm not saying you should try it I think 9 00:00:46,641 --> 00:00:51,177 its enough to think about it and to probably realize that this is not going to 10 00:00:51,177 --> 00:00:54,495 work very well. And its kind of interesting to ask why, 11 00:00:54,495 --> 00:00:58,816 why will it not work very well. After all, everybody knows what the prices 12 00:00:58,816 --> 00:01:01,337 are on the menu and how much the drinks are. 13 00:01:01,338 --> 00:01:04,250 So you've said something that had no informational benefit. 14 00:01:04,250 --> 00:01:08,315 You didn't say anything new, but you actually have said something. 15 00:01:08,315 --> 00:01:14,799 Before that you were on a date, now you're kind of in a prostitution exchange, money 16 00:01:14,799 --> 00:01:17,750 for, for sex. And it's not by providing any information. 17 00:01:17,750 --> 00:01:21,656 It's actually mentioning money, or think about another example. 18 00:01:21,656 --> 00:01:25,128 Imagine I asked you, invited you for dinner at my house. 19 00:01:25,128 --> 00:01:29,803 And you came to dinner and you were going spend $40 on a bottle of wine. 20 00:01:29,803 --> 00:01:34,034 But you don't know what wine I would like, red, white, rose. 21 00:01:34,034 --> 00:01:39,054 So you say to yourself that you might spend $40 on a bottle of wine. 22 00:01:39,055 --> 00:01:42,081 But I might be able to buy wine I like even more for $20. 23 00:01:42,081 --> 00:01:47,010 So you come to my house and say, Dan, thanks a lot for inviting me for dinner. 24 00:01:47,010 --> 00:01:52,599 But not knowing what wine you really like and worrying that I'll waste money on wine 25 00:01:52,599 --> 00:01:56,740 you don't like so much. Here is $30, go ahead and buy the best 26 00:01:56,740 --> 00:02:01,230 wine that you can with $30. This way, presumably, you will save some 27 00:02:01,230 --> 00:02:05,205 money and I would get better wine. Is that a good strategy? 28 00:02:05,205 --> 00:02:09,811 Economically, yes, but would it in any way help our friendship? 29 00:02:09,811 --> 00:02:13,703 Not so much. Now, you can see all kind of examples in 30 00:02:13,703 --> 00:02:18,662 which adding money to the equation actually make things worst. 31 00:02:18,662 --> 00:02:25,670 George Bernard Shaw has this joke where he says he goes to a woman and he says madam 32 00:02:25,670 --> 00:02:30,330 would you sleep with me for money? And the woman looks at him and says, of 33 00:02:30,330 --> 00:02:32,793 course not, what do you think, I'm a prostitute? 34 00:02:32,793 --> 00:02:35,941 He looks at her again and he says, what about for a million dollars? 35 00:02:35,941 --> 00:02:39,194 She says you know what, for a million dollars, I'll sleep with you. 36 00:02:39,195 --> 00:02:43,360 And he comes back he said okay now that we've established you're a prostitute, 37 00:02:43,360 --> 00:02:48,755 let's renegotiate the price. Now, here's one more example. 38 00:02:48,755 --> 00:02:53,370 Imagine if my car broke and I needed somebody to help me change a tire. 39 00:02:53,370 --> 00:02:57,990 And I came to you and I say look, would you please help me change a tire on my 40 00:02:57,990 --> 00:03:01,794 car? Ask yourself how likely would you be to 41 00:03:01,794 --> 00:03:05,217 help me. What if instead, they came to you and they 42 00:03:05,217 --> 00:03:08,400 say I need help changing the tire on my car. 43 00:03:08,400 --> 00:03:12,227 Would you please help me? I'll give you $3 for it. 44 00:03:12,228 --> 00:03:15,928 What would you say now? Would you be more likely to do it or less 45 00:03:15,928 --> 00:03:18,529 likely to do it? Well here is what would happen. 46 00:03:18,529 --> 00:03:22,234 Now, you could probably not tell yourself that you're doing something for the 47 00:03:22,234 --> 00:03:26,230 goodness of mankind, or to help me. Instead, you would do it as a job. 48 00:03:26,230 --> 00:03:30,694 You would not be able to say, gee, I get to help Dan to change a tire on his car, 49 00:03:30,694 --> 00:03:33,610 plus I get $3. These two forces would not add. 50 00:03:33,610 --> 00:03:38,387 They will substitute each other. And now you would say, oh, $3. 51 00:03:38,387 --> 00:03:40,084 I don't work for $3. Give me 150. 52 00:03:40,084 --> 00:03:43,320 We can talk. But for $3, I don't work. 53 00:03:43,320 --> 00:03:47,880 And the idea is that once that financial motivation comes in, the social 54 00:03:47,880 --> 00:03:53,048 motivation, feeling good about yourself, good about your action, actually goes 55 00:03:53,048 --> 00:03:56,648 away. The basic idea here is that we live in a 56 00:03:56,648 --> 00:04:00,320 continuum. There are things that are in the financial 57 00:04:00,320 --> 00:04:05,190 domain, which we call market norms, where you pay people for their work. 58 00:04:05,190 --> 00:04:09,749 Maybe if you work for me, you know, helping me I don't know. 59 00:04:09,750 --> 00:04:13,964 Cut the lawn in my house. I don't actually have a lawn but if you, 60 00:04:13,964 --> 00:04:17,870 if I had one, I could create a contract with you of how much do you get paid for a 61 00:04:17,870 --> 00:04:21,520 piece of grass or per hour or per square range or something like that. 62 00:04:21,520 --> 00:04:24,946 That's on one hand. On the other hand, we have marriage or 63 00:04:24,946 --> 00:04:29,270 long term relationship, where we don't have this exact tradeoffs. 64 00:04:29,270 --> 00:04:33,540 And the interesting thing is that we almost never live in the world that is 65 00:04:33,540 --> 00:04:37,440 purely money norms. We always live somewhere in the middle. 66 00:04:37,440 --> 00:04:41,470 There are very few jobs that you can write a very specific contract for how they 67 00:04:41,470 --> 00:04:43,867 would play out. So most things are in the middle, 68 00:04:43,867 --> 00:04:49,035 somewhere between those two. And the interesting thing is that once you 69 00:04:49,035 --> 00:04:54,010 add financial incentives to the mix, you actually can make things worse off. 70 00:04:54,010 --> 00:04:59,910 Like the example of adding $3 to get you to help me change a tire on my car. 71 00:04:59,910 --> 00:05:02,514 So let me tell you about the couple of experiments we've done on this. 72 00:05:02,515 --> 00:05:07,855 We ask people to do all kinds of things. To help us lift a sofa, to do some boring 73 00:05:07,855 --> 00:05:12,100 things on a computer. And they all look the same in terms of 74 00:05:12,100 --> 00:05:15,970 result. When we pay people nothing, they work hard 75 00:05:15,970 --> 00:05:20,729 and they're very eager to help. We add a small amount of money to the mix. 76 00:05:22,100 --> 00:05:27,260 And willingness to work goes down dramatically, we add a large amount of 77 00:05:27,260 --> 00:05:30,997 money to the mix, willingness to help goes up again. 78 00:05:30,998 --> 00:05:33,908 Much like in the tire example, would you help me for free? 79 00:05:33,908 --> 00:05:35,971 Most likely, yes. Would you help me for $3? 80 00:05:35,971 --> 00:05:39,063 Most likely, no. Would you help me for $300? 81 00:05:39,063 --> 00:05:43,664 Most likely, yes. So the interesting thing is that the $3, 82 00:05:43,664 --> 00:05:49,567 the small amount of money that comes in actually hurts rather than help. 83 00:05:49,568 --> 00:05:52,620 And the next thing we asked is what about gifts? 84 00:05:52,620 --> 00:05:57,129 As we said when we go to peoples homes for dinner, we don't give them money. 85 00:05:57,130 --> 00:06:00,000 We give them something that is obscuring the money. 86 00:06:00,000 --> 00:06:03,640 We can give them a gift, like a bottle of wine or chocolate or something else. 87 00:06:03,640 --> 00:06:08,530 What happens when we give people a gift? So what would happen if I asked you for to 88 00:06:08,530 --> 00:06:11,057 help me change a tire on my car for nothing? 89 00:06:11,058 --> 00:06:15,280 For a small gift or for a large gift? Would the small gift work like money where 90 00:06:15,280 --> 00:06:19,000 people would be offended or not? People are not offended. 91 00:06:19,000 --> 00:06:23,095 The moment you give gifts, you stay in the social domain and not in the market 92 00:06:23,095 --> 00:06:26,497 domain. And everything looks, looks better. 93 00:06:26,498 --> 00:06:31,320 And then the next question was what if we gave people gifts, but we told them how 94 00:06:31,320 --> 00:06:34,620 much it cost us? Here's a $0.10 chocolate bar. 95 00:06:34,620 --> 00:06:39,609 Here's a $5 chocolate box. What would happen when you give a gift? 96 00:06:39,610 --> 00:06:44,482 Like when you come and you give the wine but you tell the person, thank you so much 97 00:06:44,482 --> 00:06:46,997 for inviting us, here's $30 bottle of wine. 98 00:06:46,998 --> 00:06:50,600 What happens when the money becomes central to that transaction. 99 00:06:50,600 --> 00:06:55,667 Do people care about what you gave them or what you got them to pay attention to? 100 00:06:55,668 --> 00:06:58,240 Turns out it's what you got them to pay attention to. 101 00:06:58,240 --> 00:07:03,760 You gave people a gift but you tell them how much it costs, it backfires again. 102 00:07:03,760 --> 00:07:07,384 People are reducing their willingness to help. 103 00:07:07,384 --> 00:07:12,444 Now, lots of countries have all kind of habits about when do you give gifts and 104 00:07:12,444 --> 00:07:15,885 when do you give money. And particularly for weddings and 105 00:07:15,885 --> 00:07:19,450 sometimes birthdays, it's acc-, it's acceptable to give money. 106 00:07:19,450 --> 00:07:23,294 And money is, of course, efficient. It's a better gift, from an efficiency 107 00:07:23,294 --> 00:07:26,126 perspective. If you come to my house, by the way, for 108 00:07:26,126 --> 00:07:28,927 dinner giving me money's also more efficient. 109 00:07:28,928 --> 00:07:32,759 But if you go to somebody's wedding, it's incredibly efficient to give the young 110 00:07:32,759 --> 00:07:35,897 couple a check. And let them buy what they want. 111 00:07:35,898 --> 00:07:41,415 Now, it's not that money's not efficient. It's that money is not helping nourish the 112 00:07:41,415 --> 00:07:44,493 relationship. In the same way that if you came to my 113 00:07:44,493 --> 00:07:48,647 house and gave me a check instead of a bottle of wine, if you go to somebody's 114 00:07:48,647 --> 00:07:51,384 wedding. And you give them a check instead giving 115 00:07:51,384 --> 00:07:54,500 them a gift you're not helping your relationship. 116 00:07:54,500 --> 00:07:56,599 You will not become better friends tomorrow. 117 00:07:56,599 --> 00:07:59,097 Now, if you think about it, it's really a continuum. 118 00:07:59,097 --> 00:08:04,901 There's cash and checks, there are gift certificates. 119 00:08:04,902 --> 00:08:08,789 There are registry, that people tell you what they want in advance. 120 00:08:08,790 --> 00:08:13,402 All of those are more efficient than giving your own gift of what you think. 121 00:08:13,402 --> 00:08:18,162 But as the efficiency grow-ups, money is more efficient than gift certificates, 122 00:08:18,162 --> 00:08:21,470 gift certificates are more efficient than registries. 123 00:08:21,470 --> 00:08:25,862 Or maybe the other way around but heh, so maybe it's money, registry, gift 124 00:08:25,862 --> 00:08:30,563 certificates, and real gifts. As you think about the efficiency, the 125 00:08:30,563 --> 00:08:35,670 efficiency goes down but the social value of these things is going up. 126 00:08:35,670 --> 00:08:39,000 So we have to think about. That, that as well. 127 00:08:39,000 --> 00:08:42,430 And how much of the gift is really for the person. 128 00:08:42,430 --> 00:08:45,597 How much of the gift is because of what you want them to have. 129 00:08:45,598 --> 00:08:49,968 And maybe then cash is ideal. And how much of it is to nourish the 130 00:08:49,968 --> 00:08:53,362 relationship. By the way, this same thing also happens 131 00:08:53,362 --> 00:08:55,774 in the work place. Imagine you worked for me. 132 00:08:55,775 --> 00:08:59,355 And image I told you look, I can do one of two things. 133 00:08:59,355 --> 00:09:03,915 I can give you a thousand dollar in cash or I can send you to a weekend to the 134 00:09:03,915 --> 00:09:06,680 beach. Now you might look at and you would say 135 00:09:06,680 --> 00:09:10,930 well, give me the cash. I can maybe go to a cheaper hotel in the 136 00:09:10,930 --> 00:09:15,480 beach and get some new gadget. So from your perspective the cash would be 137 00:09:15,480 --> 00:09:19,527 more efficient. But imagine the following question. 138 00:09:19,528 --> 00:09:23,680 How would it work if a week from now, after giving you the cash, I ask you to 139 00:09:23,680 --> 00:09:27,247 come late to the office? I ask you to come on the weekend, I ask 140 00:09:27,247 --> 00:09:30,039 you to stay late, I ask you to do some extra work. 141 00:09:30,039 --> 00:09:34,323 And how would it work if I gave you the gift, without asking you, I gave you the 142 00:09:34,323 --> 00:09:38,590 gift rather than the cash. What the results basically show Is that if 143 00:09:38,590 --> 00:09:42,077 you got the cash you've not build any social capital. 144 00:09:42,078 --> 00:09:46,512 So if the workplace off-, officer asked you to stay on the weekend at work or late 145 00:09:46,512 --> 00:09:49,658 at night or so on. You basically would say, and how much 146 00:09:49,658 --> 00:09:53,399 would you pay me for that? But if the workplace gave you a gift, you 147 00:09:53,399 --> 00:09:56,543 all of a sudden moved a little bit in this social realm. 148 00:09:56,543 --> 00:10:00,746 Now, its a bit more like marriage. Then work for money, you feel more 149 00:10:00,746 --> 00:10:05,751 obligated and the give and take between the two of you is increasing to a higher 150 00:10:05,751 --> 00:10:08,853 degree. You'll be willing to do more things for 151 00:10:08,853 --> 00:10:11,980 them. So the idea here is that there is this 152 00:10:11,980 --> 00:10:18,039 financial norms and there's social norms. And as we move around them, we get to 153 00:10:18,039 --> 00:10:22,310 sacrifice more, we get to give more, but we also get to get more. 154 00:10:22,310 --> 00:10:26,588 And as you move closer to a social relationship, there's much more give and 155 00:10:26,588 --> 00:10:30,435 take, and it's much less precise. Sometimes I give you a gift, sometimes I 156 00:10:30,435 --> 00:10:34,170 expect something from you. It's not exactly been counting. 157 00:10:34,170 --> 00:10:36,902 Now, I need to give as well, I can't just expect that, right? 158 00:10:36,902 --> 00:10:40,400 It's not just something that happens. But there is some exchange. 159 00:10:40,400 --> 00:10:45,752 This I think is also where social benefits in companies fit in, right? 160 00:10:45,752 --> 00:10:49,230 I pay for your healthcare. I give you a gym. 161 00:10:49,230 --> 00:10:52,554 I get you lunch. All of those things are not about the 162 00:10:52,554 --> 00:10:56,622 financial transactions. They're about look, I really care about 163 00:10:56,622 --> 00:11:01,321 you and we're going to have some reciprocation in this more social domain. 164 00:11:01,322 --> 00:11:07,173 Now, imagine that you're in this range somewhere and then at some point you 165 00:11:07,173 --> 00:11:12,990 switch to the financial domain. You move into the direction of the market 166 00:11:12,990 --> 00:11:15,262 norms. What, what will happen? 167 00:11:15,262 --> 00:11:19,552 And here is a beautiful experiments, set of experiments by Uri Gneezy and Aldo 168 00:11:19,552 --> 00:11:22,700 Rustichini. And they took this daycare center. 169 00:11:22,700 --> 00:11:26,577 And in a daycare center sometimes the parents were late. 170 00:11:26,578 --> 00:11:28,840 And when the parents were late, what usually happens? 171 00:11:28,840 --> 00:11:32,610 The school teacher looks at her watch, she looks at the parent, she looks at her 172 00:11:32,610 --> 00:11:34,878 watch. She makes sure they realize that she's 173 00:11:34,878 --> 00:11:37,090 watching them and noting that they're late. 174 00:11:37,090 --> 00:11:40,807 They feel guilty, they apologize and they take their kid and they try to work 175 00:11:40,807 --> 00:11:45,430 better. But under Uri and Aldo's supervision, this 176 00:11:45,430 --> 00:11:49,817 daycare center basically introduced a fine. 177 00:11:49,818 --> 00:11:52,260 If the parents were late, they would have to pay a fine. 178 00:11:52,260 --> 00:11:57,772 Now, if the fine was a $1,000, the parents would probably pull the kids out and move 179 00:11:57,772 --> 00:12:02,535 to a different a different daycare. But the fine was a few dollars. 180 00:12:02,536 --> 00:12:07,557 Now, what happens now? Imagine you're a parent. 181 00:12:07,558 --> 00:12:10,972 You're there in the office, you're working, there's an important task, you 182 00:12:10,972 --> 00:12:13,497 look at the watch and you realize you have to leave now. 183 00:12:13,498 --> 00:12:16,120 But now, there's a fine. What do you say? 184 00:12:16,120 --> 00:12:20,167 You can say, oh, at this cost, I have something much more important. 185 00:12:20,168 --> 00:12:23,413 The kindergarten can keep my kids for a few more hours, maybe until 7 in the 186 00:12:23,413 --> 00:12:26,341 evening. I have more important things here to do. 187 00:12:26,341 --> 00:12:28,680 And what happened? Exactly that. 188 00:12:28,680 --> 00:12:33,670 All of a sudden, parents were more late. Now, here is what happened. 189 00:12:33,670 --> 00:12:36,500 They kept running this event, they kept on running it. 190 00:12:36,500 --> 00:12:38,350 And people became later and later and later. 191 00:12:38,350 --> 00:12:41,060 Because now, there was no guilt. It was a cost. 192 00:12:41,060 --> 00:12:44,318 Is it worth it, or is it not? And then, at some point, they canceled 193 00:12:44,318 --> 00:12:47,456 after a few weeks. They canceled the fine, and they went back 194 00:12:47,456 --> 00:12:51,447 to the, the previous system. Now, can you go back? 195 00:12:51,448 --> 00:12:56,696 After you move to a market norm, something that people just do the cost and benefit 196 00:12:56,696 --> 00:12:59,997 analysis, can you introduce guilt all of a sudden? 197 00:12:59,998 --> 00:13:03,648 The answer is, not for awhile. Probably not until the next school year. 198 00:13:03,648 --> 00:13:06,003 Now, parents were more late. Why? 199 00:13:06,003 --> 00:13:09,890 Because you take guilt away. And then you took the fine away. 200 00:13:09,890 --> 00:13:13,990 And now, there was just no perceived consequences for being late. 201 00:13:13,990 --> 00:13:21,695 So the point here is that once we move to market norm, it're really hard to recover 202 00:13:21,695 --> 00:13:25,090 from that. And here's another example to, to think 203 00:13:25,090 --> 00:13:27,670 about. Imagine that you had two credit card 204 00:13:27,670 --> 00:13:30,790 companies. And one credit card company told you, you 205 00:13:30,790 --> 00:13:34,100 know what, we're your friends and we're helping you out. 206 00:13:34,100 --> 00:13:38,845 And they send you a cookie, you know, or they, they gave you a mug or they gave you 207 00:13:38,845 --> 00:13:42,129 some, some gifts. And another said, we are just a credit 208 00:13:42,129 --> 00:13:45,504 card company, it's just business. Okay. 209 00:13:45,504 --> 00:13:49,887 And then one day you were late paying your credit card bill. 210 00:13:49,888 --> 00:13:53,490 And they were both gave you a hefty fine, which is what credit card companies do. 211 00:13:53,490 --> 00:13:56,570 And you called them up. And you said, I'm really sorry I was late. 212 00:13:56,570 --> 00:14:01,796 My daughter was sick, I got late to the Post Office, could you please forgive this 213 00:14:01,796 --> 00:14:04,845 fine? And they both said, no. 214 00:14:04,845 --> 00:14:09,326 How would you react to both of those? The first one had a social relationship 215 00:14:09,326 --> 00:14:12,620 with you, or at least they claimed they had a social relationship with you. 216 00:14:12,620 --> 00:14:16,855 But if now they say no. You will basically get incredibly pissed 217 00:14:16,855 --> 00:14:18,860 off. And you will most likely cancel your 218 00:14:18,860 --> 00:14:21,845 credit card. Because you had the relationship that was 219 00:14:21,845 --> 00:14:25,560 supposed to be a social relationship. But now they tell you, you never had a 220 00:14:25,560 --> 00:14:27,660 social relationship. They don't really understand you. 221 00:14:27,660 --> 00:14:31,161 They're not giving you a discount. They're not willing to accept your 222 00:14:31,161 --> 00:14:34,024 challenges. The other company, if they said no. 223 00:14:34,024 --> 00:14:37,000 You don't get to be upset. They never promised you anything. 224 00:14:37,000 --> 00:14:40,540 It was just business. There are strict rules, here it is. 225 00:14:40,540 --> 00:14:44,447 So what happened? The second company people are not upset. 226 00:14:44,448 --> 00:14:48,608 So when we think about it, where do we want to be in the range between market 227 00:14:48,608 --> 00:14:52,248 norms and social norms? As we move as a company toward the social 228 00:14:52,248 --> 00:14:56,670 norms, we can expect more from people, to forgive us more from time to time, to be 229 00:14:56,670 --> 00:15:01,092 willing to accept, to do extra things, more variance less been counting, but it 230 00:15:01,092 --> 00:15:04,116 also has a cost. It means that we need to actually build 231 00:15:04,116 --> 00:15:07,062 the other side. We need to help, we need to be there when 232 00:15:07,062 --> 00:15:11,352 something breaks so we are not just expecting social norms, we're also giving 233 00:15:11,352 --> 00:15:16,316 social norms. So how do we think about this whole notion 234 00:15:16,316 --> 00:15:21,102 of market norms versus social norms? In economics, there's a general way to 235 00:15:21,102 --> 00:15:24,578 describe contracts. And we think of them as complete contracts 236 00:15:24,578 --> 00:15:28,460 and incomplete contracts. And complete contracts are things that we 237 00:15:28,460 --> 00:15:32,294 can specify exactly what you would do and what you would get. 238 00:15:32,295 --> 00:15:36,988 And the reality is that we try to make contracts with people always complete, 239 00:15:36,988 --> 00:15:41,611 exactly about what will happen, but the reality is that it's incredibly difficult 240 00:15:41,611 --> 00:15:45,805 to write complete contracts. So now the question is, what is better, to 241 00:15:45,805 --> 00:15:50,590 write partially complete contracts or to try and write incomplete contracts? 242 00:15:50,590 --> 00:15:54,220 Contracts that general and me specified. Something like a marriage. 243 00:15:54,220 --> 00:15:57,850 You don't sit there and write the whole contract of what you will do and what they 244 00:15:57,850 --> 00:16:00,788 will do. You basically say, we will take care of 245 00:16:00,788 --> 00:16:03,616 each other. We will try to make it so that in the long 246 00:16:03,616 --> 00:16:07,008 term, things would work out. Sometimes you will do more, sometimes I 247 00:16:07,008 --> 00:16:10,300 will do more. I will, not sure what the circumstances of 248 00:16:10,300 --> 00:16:14,208 our lives will be, but we will adjust and change accordingly. 249 00:16:14,208 --> 00:16:18,464 And the idea is that I think we're thriving too much for the complete 250 00:16:18,464 --> 00:16:21,769 contracts. Because as we try to write everything in 251 00:16:21,769 --> 00:16:26,633 the contract, the things that govern the contract, the social norm above it, 252 00:16:26,633 --> 00:16:29,929 basically go away. If I write a specific contract with you, 253 00:16:29,929 --> 00:16:34,024 if something new comes and something different, you're going to adhere to the 254 00:16:34,024 --> 00:16:36,640 letter of the law and not to the spirit of the law. 255 00:16:36,640 --> 00:16:42,894 But as we move to more general contracts. With handshakes and general agreement and 256 00:16:42,894 --> 00:16:47,277 less specific things, we basically agree to adhere to the spirit of the law. 257 00:16:47,278 --> 00:16:50,920 And not to the letter of the law and sometimes it's much better. 258 00:16:50,920 --> 00:16:55,129 Now, I actually think it's quite a shame we're taking all of these general 259 00:16:55,129 --> 00:16:57,814 contracts and try to make them more specific. 260 00:16:57,814 --> 00:17:02,504 Because we can't make them really specific enough and by doing this, we're actually 261 00:17:02,504 --> 00:17:06,799 killing them. I'll give you kind of one, one example 262 00:17:06,799 --> 00:17:10,137 that has been I think resonates with me a lot. 263 00:17:10,138 --> 00:17:15,127 Imagine a janitor in a hospital and imagine this janitor has a very specific 264 00:17:15,127 --> 00:17:20,183 rule about what they're suppose to do, pick the trash and mop and do and do some 265 00:17:20,183 --> 00:17:23,238 things. What happened if one day a patient is 266 00:17:23,238 --> 00:17:28,373 falling on the ground from their bed or somebody else needs help in finding out 267 00:17:28,373 --> 00:17:32,224 their relatives? Berry Schwartz gives this example and he 268 00:17:32,224 --> 00:17:37,450 says, of course, you would not want this individual to adhere to the letter of the 269 00:17:37,450 --> 00:17:40,480 law. You would want to adhere to the spirit of 270 00:17:40,480 --> 00:17:44,256 the law. But what happens if you get this person to 271 00:17:44,256 --> 00:17:47,017 have a very, very detailed job description? 272 00:17:47,018 --> 00:17:51,791 Are you losing, are you basically losing the potential that you would go beyond his 273 00:17:51,791 --> 00:17:54,380 job? By restricting the job and making it 274 00:17:54,380 --> 00:17:59,472 incredibly specific, are you focusing on doing only what's there and not what's 275 00:17:59,472 --> 00:18:03,493 really important? So I think the interesting question is, 276 00:18:03,493 --> 00:18:07,756 what kind of contracts do we want? And what kind of contracts would get 277 00:18:07,756 --> 00:18:12,040 people to be happier and more motivated and be willing to do more? 278 00:18:12,040 --> 00:18:16,525 Both in the professional domain and in a private domain. 279 00:18:16,526 --> 00:18:22,577 And as a last, last story on this. There was a woman who put an ad in 280 00:18:22,577 --> 00:18:27,128 Craigslist. And she said she's beautiful and qualified 281 00:18:27,128 --> 00:18:33,034 and wonderful in all kinds of ways. And she usually sees very beautiful women 282 00:18:33,034 --> 00:18:37,160 like her dating men who make at least $500,000 a year. 283 00:18:37,160 --> 00:18:40,080 This was in New York City before the financial crisis. 284 00:18:40,080 --> 00:18:44,730 So she said look, I'm as beautiful as these women who are dating men who make 285 00:18:44,730 --> 00:18:48,873 $500,000 a year or more. But I personally have been stuck, I got 286 00:18:48,873 --> 00:18:53,103 into the $250,000 barrier. I have not been able to break that 287 00:18:53,103 --> 00:18:56,284 barrier. I can't date men, I can't find, seem to 288 00:18:56,284 --> 00:19:02,328 find men who are making more than that. And she asked for advice and suggestions 289 00:19:02,328 --> 00:19:05,559 of how to go about it. Now, the reality is that it's true, 290 00:19:05,559 --> 00:19:10,356 beautiful woman marry wealthier guys. That's just kind of the realization of the 291 00:19:10,356 --> 00:19:14,007 market. But she said it in a very explicit way. 292 00:19:14,008 --> 00:19:18,576 And you can ask yourself, what does it do to you if, if the contract is so explicit, 293 00:19:18,576 --> 00:19:23,049 I'm beautiful, I'm getting money, kind of makes the whole thing dirty. 294 00:19:23,050 --> 00:19:27,566 Imagine you made the contract. Imagine you made enough money to satisfy 295 00:19:27,566 --> 00:19:29,960 her. And she was beautiful enough in your mind, 296 00:19:29,960 --> 00:19:32,720 and you got together. How would this relationship look like? 297 00:19:32,720 --> 00:19:37,412 What would happen on the first night she doesn't want to have sex or doesn't want 298 00:19:37,412 --> 00:19:41,439 to, to be a good, a good partner, right? It's a really strange transaction of 299 00:19:41,439 --> 00:19:44,739 saying beauty for money. And indeed, one guy wrote her back. 300 00:19:44,739 --> 00:19:49,497 And he said, look, I'm wealthy enough. I make more than the required amount. 301 00:19:49,498 --> 00:19:54,071 And you seem very beautiful. And I think this is a reasonable deal. 302 00:19:54,071 --> 00:19:59,855 But, he said, my assets, which is money, is likely to appreciate over time. 303 00:19:59,855 --> 00:20:05,100 And your assets, which is beauty, is likely to depreciate over time. 304 00:20:05,100 --> 00:20:09,390 And under those conditions, he said, I prefer to lease than to buy. 305 00:20:09,390 --> 00:20:16,056 And you can see how putting out an offer that is, has a social component of living 306 00:20:16,056 --> 00:20:20,619 together, but putting it in terms of market norms. 307 00:20:20,620 --> 00:20:25,473 Actually invites a very different way of thinking about the relations and think 308 00:20:25,473 --> 00:20:27,973 about her and its very unlikely to work out. 309 00:20:27,974 --> 00:20:33,474 So, think about your relationships, think about where they lie on this range for 310 00:20:33,474 --> 00:20:38,248 market norms to social norms. And where would they be ideally, both the 311 00:20:38,248 --> 00:20:42,184 social relationships, business relationships and so on.