When we think about the motivation, in terms of salary, the usual assumption, is
that people just want to rest. And if we leave people alone, nobody would
want to work. And because of that, we need to pay
people. Basically the idea is, that people want to
sit on the beach drinking mojitos. But we, as their employers, don't want
people to sit on the beach drinking mojitos, so we have to pay them.
And the payment, it's what's causing the motivation.
The motivation is leading to labor. And the reason people are doing this labor
to start with, so they have enough money to rest on the beach drinking mojitos,
plus to pay bills and so on. But the basic notion is that work is
adversive. That people hate working and the only
reason that people work is to get, to get money.
Now of course, this is not, the real reason.
And as we've talked already, there's lots of other things that are happening in
labor. People find tremendous amount of
satisfaction in labor. In fact, even if you look at rats.
If you look at rats, and you say would rats just want to work if they get food or
do they enjoy working just for its own sake?
Even rats enjoy work for its own sake. So for example in some, eh, all the
experiments on what is called counter freeloading, what is happening is that
rats and mice are given the choice of either getting free food that doesn't
require any labor. Or they have food that requires some
labor. And you know what?
Sure they take some of the free food, but they don't feed on that exclusively.
They also go to the food that requires some effort, and try to get that as well.
So it turns out that even animals are not just about, eh, how much they can get
without working; even animals enjoy work in some important ways.
And you can think about squirrels, you can think about dogs, you can think about all
kind of animals that seem to enjoy working to some degree.
By the way the one exception so far, is the domestic cat.
The domestic cat doesn't seem to enjoy at all, labor.
And if they could do anything with no effort it seems to be, they seem to be
doing it. Okay, so that's the idea that life is
composed by many more motivation than just money alone.
And we talked about meaning and a sense of purpose and a sense of accomplishment and
competition and so on and so forth. But now let's turn our attention to money.
Money is good. Money is also one of the motivators.
The fact that it's only one of the motivators, doesn't mean it's not an
important one, of course, it's a crucial, important motivator.
And, for now I want to talk about one aspect of money.
So one aspect of money, is that we pay people, and they get a salary.
And if they behave well, they get to keep their job, and so on.
But recently, there's been more and more jobs that have bonuses.
And a bonus is a particular form of payment, it's a form of payment that is
contingent on performance. And I want to talk a little bit about how
bonuses work, what is the theory of bonuses and how do they really work.
The basic idea of a bonus is that it, if I offer you a bonus for a particular level
of effort, you would try harder. And because you would try harder you would
be more successful, and therefore I by providing you a bonus can redirect your
effort to be more productive. But is that always the case?
And is it always that case that more bonuses would yield to higher effort?
So there's an old research in psychology on what's called the Yerkes Dodson Effect.
And the notion of that is that if we took incentives, and we took performance, and
we said what is the relationship between incentives and performance?
The usual theory is that as you increase the incentives, performance will go up.
I offer you higher and higher bonus, performance should go up.
Or maybe you could argue, maybe it would go up to a certain level and then it will
have diminishing returns, it look kind of flattened out, because at some point you
can't work harder. But what Yerkes and Dodson argued, and
showed, is that the task actually looked the following.
When you increase incentives people perform better, but above certain level,
performance actually goes down, it's not that is flattens out it actually goes
down. How did Yerkes and Dodson first show this
effect? They took, they put mice in a maze.
And the maze was changing every day. And every day the mice have to learn, had
to learn what are safe areas of the maze and what are dangerous areas of the maze.
So one day maybe the white symbolize safe and the black danger.
And one day stripes were safe and polka dots were dangerous and so on.
And what is safe? Safe is a part of the maze that has no
electrical shock and dangerous is the part that does have electrical shock.
And everyday the mice had to learn what are the safe zones, and which are the
dangerous zones. And over trial, across days, what Yerkes
and Dodson did, was to increase the amount of the shock.
So sometimes the shock was very, very little.
And guess what? How fast did the mice learn when the shock
was very small? Very, very slowly.
What happened when the shock increase in intensity?
As the shocks increase in intensity, the motivation of the mice was higher, and
they learned faster. Right?
All of a sudden it's more informative, it's more useful, it's more beneficial to
learn faster, and the mice were learning faster.
But guess what, at a certain level the shocks became so strong that the results
started backfiring. At a certain level performance did not go
up, and it did not flatten, it actually started getting worse and worse and worse.
And you could probably imagine how it would look for you.
Imagine I asked you to walk around this campus, and I made some buildings safe and
some building dangerous. If the shock was tiny it was
uninformative, it was like so light you would hardly feel it, you wouldn't be that
motivated to learn quickly. As the shock went up, you'd probably care
more about it and try harder and figure out which buildings are dangerous and
which are safe. You would commit it to memory, you would
try to rehearse it, you would do all kinds of things.
But as the shock would become so strong that it will take your breath away, that
you could not do anything else, the fear of the anticipated shock will probably
paralyze you. And you'll probably not be able to think
about anything else. And under those conditions, as the shock
would get stronger and stronger and stronger, your memory would actually go
down. But the results from Yerkes and Dodson
suggest that this idea of increased stakes, increased incentives to learning.
Might have these non linear relationship, this inverse-u relationship, where people
could want to perform better, but actually perform worse.
So, with this, would this work? And the basic idea that we went after, is
that as you promise people more money for higher performance.
As the bonus, potential bonus increases, people want to perform better.
It's not as if, if I offer you a bigger bonus you don't want to perform to a
higher degree. You want to do it more, but the question
is, is it some level of wanting to do something higher?
Can you do it, or does it backfire? If you want to do it with all your heart
and soul and it's the only thing you can do about it, can you actually do the job
better or do the job worse? So how do we test this idea that the level
of bonuses could either positively, or flat, or negatively influence performance?
In the US, it would be very hard for us to afford big bonuses, the kind of bonuses
that people give truly in the work place. So we went to India, we went to some small
villages where people don't make much money and we could give them lots of money
in their currency, that would not be too expensive for us.
And we basically created the following experiment.
We gave people a set of tasks and to some people we said, look, if you, if you
perform these set of takes to these standards, you would get the following
bonus. And if you get it to a higher performance,
you'll get a bigger bonus. So people had two levels of bonuses and
the question is would they perform below the level of the first bonus, between the
level of the first and the second bonus or above the level of the second bonus?
And on top of that we had three bonus conditions.
Some people we promise what we call the small bonus, which was if you don't do all
of these task as well you, as well as possible, the best possible level you will
get one day of your salary, an average day of people's salary in that particular
village. It wasn't a tiny bonus because for one
hour they could get a one day salary, but it was small compared to the other
bonuses. In the second bonus condition, we said, if
you do these tasks well at the highest possible level, you would get two weeks of
salary. Right?
Much, much more. And the third group we said, if you do
these tasks as well as, as possible, you would get five months of salary.
So now think about it. The first group had the maximum bonus of 1
day of salary, two weeks of salary, five months of salary.
Now if they perform half as well, they would get half, a third , a third, and so
on. The question is, how well would they
perform? And how would the relationship look
between these two levels of bonuses? And just think to yourself, if you had to
draw this relationship, imagine a graph and you have to predict what will be the
level of performance. Will performance go up linearly?
Will it flatten out or will it look like the Yerkes Dodson Effect, where mutual
actually go, go down? What, what would you predict?
Well here are the results. We had many different games, and I'll show
you one after the other. The first game was, eh, called the
quarters game. And in the quarter game, people have
multiple pieces of metal that each was like a quarter and you had to fit nine of
them in a particular shape. Eight of them is very easy, nine is a
little tricky and we gave people a time limit and the question was could they do
it in this time limit? What happened?
At the low level of the bonus, about 30%, almost 30% of the people managed.
In the middle of the bonus, slightly more, almost 40% of the people managed.
What happened at the very highest level of bonuses, the five-month salary condition?
Performance went down dramatically. Now, almost nobody was able to do that.
The same result basically appeared in other areas as well.
We had a game called Simon. Simon is a game with four lights, and each
of them is associated with a tone as well. And the machine presses them one after the
other, so you can hear a sound and, and, see a light.
And you have to press it. And then you see two of them, oh.
And then you have to do oh and it goes on like this and it increases by one number
every time for a long, long time until you fail in repeating the exact pattern.
What happened? In the low level condition people were
quite good, the middle level condition they were basically, almost the same, and
then at the highest level of bonus, performance actually went down
dramatically. In this particular game, we didn't see the
increase, we only saw the decease. We had another game we called recall last
three digits. What we did in this game is we read aloud
to people a sequence of numbers, 7, 18, 25, 87, 76, 13, 18, 5, 3, 2, 17.
And then when we stopped in a random place, we said please remember, recall,
tell us the last three ones that we said aloud.
Could you do it? And we gave people many, many chances to
do it and saw how many of them they could do.
What happened? Again no difference between the low level
of bonus an the middle level, decrease for the high level.
Another game we played was Labyrinth, its a game with the plane in front of people,
with the little ball and you can manipulate the plane and shift it in
different directions, And this we get the ball to on a particular path.
And we define a particular version that would get people to perform well, and
another level that would perform very well.
What happened now? As bonus increased, performance just went,
went down. The same thing happened with some dart.
A game. We actually had initially some darts, with
a, a metal point, but we figured out this was too dangerous, so we did a darts game
with tennis ball covered with velcro. Here there was a slight increase between
the low and the middle and a slight decrease between the middle and the high.
Eh, we had another game in which you have to spread two levers and a particular ball
has to go up, and how far can you get it. In this one too we saw no difference, and
then a decrease. And if you look at all the results, and
our task really kind of had three components.
There was a creativity test, there were concentration tests, and there were model
skill tests. Across all of them we basically saw one
pattern. And if you average across all of them, no
difference between the low and middle level, and then decrease at the high
level. It means that as we get to high bonuses
things are not flattening out, they're actually going, going down.
Now, when we started this experiment, we actually had a slightly different,
approach. What we were going to do is we're going to
use a principle called loss aversion. And the idea of loss aversion, is the idea
that people hate losing more than they enjoy gaining.
So if losses are more important than gain, we said maybe we can create even more
stress by prepaying people. So the idea was the following.
People came to the experiment, we prepaid them.
If somebody was in the five months bonus condition, we would give them all the
money in cash to put in their wallet. And then we would say, please perform
this. And if you perform it to the highest
possible level you will give to, you will get to keep all the money.
But if you don't you'll have to give us the money back.
Now financially it's equivalent, but we thought that maybe if people have the
money on them the level of stress would be higher.
And actually the first participant in that experiment, in the five months bonus
condition, completely choked, he was terrible.
He couldn't perform anything. He was trying.
He was trying to focus. He was trying to breathe.
But he was just failing time after time after time.
And when he finished, he had to give us back all of the money.
The next participant was the same. He was trying to you know, concentrate and
focus and do some yoga and meditation. But again, he couldn't do anything
correctly. I have to say that at that point in the
game, which was going so well, I was a little happy because I had, the results
were looking In that direction, that the stress will overwhelming people's
performance. But the second participant did something
unexpected. And at the end of the experiment, when we
asked him to pay us back all the money, he turned around and ran away.
And the research assistant did not have the heart to chase him.
So what we did was, we had to move to a different village, because after the rumor
about this, came out we couldn't stay in the same village.
And, and we also move to the other approach, the one I described to you in
which, instead of giving people the money upfront, we, gave him money at the end.
Now, this idea of giving people the money upfront versus the end is important,
because it's a question of loss aversion, but it also has another important point.
Think about real bonuses in life. Are they in the gain condition or the loss
aversion condition? If somebody has been getting bonuses for a
few years, in which condition they are? Now they don't have the bonus, so of
course strictly speaking they haven't, they don't have the bonus and have to give
it up, but could it be that they are already buying homes and cars and vacation
and sending their kids to school, under the assumption that they will make this
bonus. And now they're stressed about it to an
even higher degree, because right now, what happen is that people are in this
condition. They think about losing, they think about
not being able to do everything they have committed to, in some sense, and therefore
they are even more stressed. Now as you can imagine, I've talked to
many bankers about this. And most bankers don't like it so much.
Actually when you describe the results, about, people in India, and, students and
so on, they have no problem. But the moment you ask bankers whether if
this could apply to them, their usual answer is, no.
Me? Heaven forbid.
How can it be? Of course it would never affect me.
And, now this, of course is a, goes under the rubric of self-justification.
And we'll come back to it, eh, in a few minutes to talk about whether this would
apply to executives in high positions and so on.
But before we continue with this, one of the things that troubled us, was the fact
that all tasks basically behave the same. In all tasks, performance was going down
for the highest level of pay, and this did not fit our intuition.
Our intuition was that there would be some tasks, particularly the mechanical tasks,
that higher pay would yield higher performance.
For example, what if I paid you to jump? If I paid you a small amount to jump, or a
medium amount to jump, or a very high amount to jump?
Don't you think that you would jump more as the amount of bonus for jumping would
go up? At least that's the intuition.
I mean, by the way, the intuioton is very different for mechanical task than for
mental tasks. Because in mechanical task, you're under
control of your muscles. You can decide how many time to jumps, how
much to try, eh, not to sleep, to stay awake a bit longer and so on.
With mental task it's a bit more difficult.
With mental task it's not the case that you can just close your eyes and say I
want to think more, I want to remember more, I want to do it to a higher degree.
So we thought that there should be a separation between the mechanical tasks
and the mental tasks. But we didn't see it in the first
experiment, but maybe, we thought, it was because our mechanical task was not, were
not just mechanical. Throwing a ball, for example, is not a
simple mechanical task, it involves other things.
So could we make the mechanical task even simpler?
Could we make it less? And we tried that.
We did the simplest mechanical test we could we asked people to put two fingers
on the keyboard and alternating pressing them.
And the faster they alternated the higher the performance, and the slower the lower
the performance. So this was the mechanical test, very,
very simple, no thinking required. The mental task was a task we took from
our experiments on dishonesty. And we gave people a set of 12 numbers,
and we asked them to find two numbers that add to ten.
And we gave people either this one or this one first, and then we flipped it, and
then we gave it to them again. And we did it for different levels of
bonuses. And what happened?
When we talked about the mechanical task, as we gave people a higher bonus,
performance went up. When we did the same thing with the mental
task, as we gave people higher bonuses, performance went down.
So we replicated our previous result for the mental arithmetic task, and we got the
opposite prediction for something that had very, very simple mechanical task.
And this I think suggest, that our intuition about how bonuses would, eh,
drive performance is relying on intuitions about mechanical tasks.
We think about ourselves as engines and muscles and if you just try harder, if we
just got paid more, you would lift more weights or jump more times.
Whereas the mind, tasks that have to do with concentration, thinking, memory and
so on are actually much more complex and you can't will yourself into higher
performance in the same ease. And in fact as you try to will yourself,
into higher performance, things can actually go backward.
And you can ask yourself this question, imagine you go into surgery, it's a very
delicate brain surgery, and just before you go to, eh, your falling asleep, you
meet the surgeon. And you can say thank you very much,
please do your best, or you could give them a bonus.
You could say you know what, if you do well, I'll give you $100,000.
Or maybe you can make, give him a negative bonus, a punish, potential punishment.
You could say you know what, if you don't do well, I hire two hit men to wait for
you outside the back alley and they would, you know, break your knees or something
like that. Is this something that you would want?
Would you want your brain surgeon, as they are operating on you, to think about
either the yachts they could buy with all this money or their knees getting broken
if you don't do a good job? Probably not, in fact there's a lot of
research in what is called a state of flow.
And the idea of a state of flow, is that once you get immersed in a task, you think
about nothing about the task. You're completely absorbed and consumed
and focused on that task, nothing else matters.
And this state of flow is what's driving the highest-quality performance.
Now, from this perspective, it's kind of strange to think about bonuses.
What are bonuses? Bonuses are basically saying, I don't
think you're going to work for me very hard, so what I'm going to do, I don't
think you're motivated, I think you want to do it hard enough, so I'm going to put
a big pile of money on the way and by you thinking about the money all the time,
you're going to work in the way that I expect you to.
What kind of task this is going to be relevant to?
Well if it's laying bricks, or something very, very mechanical, maybe it works.
Are people thinking about the money and that would motivate me to work harder, but
anything else, do you really want part of peoples' minds to be occupied with how
much money they're making and is this the right amount and how much effort?
Or do you want it to be in a state of flow, fully consumed by it?
And if you want a state of flow, maybe bonuses are actually distracting, maybe
take, taking away attention rather than helping.
Maybe they are decreasing motivation, rather than increase motivation.