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Now, so what this tells us about
basketball, is that in basketball, there's

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a belief of clutch players, but there's
not the reality of clutch players.

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Especially not in percentage improvement.
And you know what, if we compare

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basketball to Wall Street, basketball is
actually much more selective.

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Many more people want to play basketball,
and the basketball league is actually

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quite small.
Compared to the size of investment banking

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for example.
And to be one of those 17 people who are

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the clutch players, it's a much more
self-selected club.

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These are people who are much more in
detail than bankers.

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And basketball is much more mechanical
compared to banking.

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Right?
If you think about it, what we saw was

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that bonuses were effective for mechanical
tasks and not for mental tasks.

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Basketball is partially mental, partially,
partially mechanical but banking is just

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mental.
So with all of these could it be that

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bankers are only improving with the size
of bonuses that they never get stressed

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that they never get those decrease in
performance.

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I don't think so.
I'll tell you one last thing.

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When I go to these bankers one by one and
I say.

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Tell me, what do people do in the office
in October, November, and December?

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They tell me, privately, that they don't
do anything but think about their bonus

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and talk about their bonus.
That, every day, they pop up a spreadsheet

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on their computer and they look at their
performance and they calculate their

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bonus, and they talk to their friends
about what it is and then.

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The next day they do it again and again in
trying to figure out what will be their

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bonus.
So even if they don't admit that this is

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stressing them out, they certainly admit
that this is taking part of their mind

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share.
They certainly admit it's part of their

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thought processes.
Time, energy, attention is directed to all

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these bonuses and away from actually doing
their work.

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So, what do we come out to this thinking
about bonuses.

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Of course we talked about the fact that
money is just one of many motivators for

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human behavior.
But even when we talk about money, money

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doesn't always behave.
In the way we think it should.

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We talked, when we talked about the
psychology of money, about how giving

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people small amount of money can sometimes
backfire, because it could make, change

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something from a social relationship to a
financial relationship, from something

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people do for you as a favor to something
they do as a job.

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This is the low end.
At the high end, we see that bonuses also

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don't behave in the way that we think they
would.

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Sometimes we can give very high bonuses
and people try hard, but this fails

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because they over try and they over
strive, and this pressure and attention is

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actually getting them to prefer worse.
So when we think about money and about

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bonuses, I think we need to think very
carefully.

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What is this amount of money doing?
How is it changing human psychology?

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How is it changing the minds of, how it
change the motivation?

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If we keep on having the view of people as
rats in a cage, with very simple rules

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between, between rewards and outcome,
bonuses and performance, we're actually

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going to get things wrong.
And we need to truly understand the

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nuances of human motivation and thinking.
If we want to use money in the right way

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to incentivize good behavior and not to
get lots of[UNKNOWN].

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If you think about everything we've talked
today, it's really about what are all the

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things that create motivation at the end
of the day.

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And when we think about motivation, the
simplest thing is to think about

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motivation is all about payment.
We pay people they'll be more motivated.

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We don't pay enough they'll be not as
motivated.

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But I hope that what you think about now
is that these equation of motivation

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includes all kinds of other things.
It's about Meaning and creation and

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challenge and ownership and identity and
pride and all of those things.

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And you can ask yourself and how do we tap
all of them.

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If we want to motivate people, sure we can
do it with payment to some degree, but why

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not tap all of those other, all of those
other elements.

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Why not think about them as well.
And I recently got a call from a big bank.

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This was a big bank that eh, takes 50% of
early profit and distribute them between

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people work at the bank as bonuses.
And we spent about 2 hours on the phone

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and they described to me the 16 equations
they use.

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To identify how much each person should
pay, and they create an equation for how

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much money directly they bring and how
much they help other people, and there is

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an equation for this and an equation for
that, and there was 16 different equations

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that determine it, and at the end of the
day they distributed a heck of a lot of

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money to all of these people based on
these equations, enough that we went all

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over them and we talked about this.
I said, what about other things, right?

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Why need you ask somebody who, gives a
check to somebody for over $5,000,000, to

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also give them a hug?
Or maybe, invite them for a glass of beer,

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or have dinner together?
I said, how much would that motivate?

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I asked the person sitting in front of me,
the person who was in charge of,

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compensation, to say, "If you invited
somebody for beer How much less you could

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pay them and still get them to work just
as hard.

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And that person said we would never give
hugs, and never give beers and invite

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people for dinner.
I said first of all why not.

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Second I said I think this is really
immoral.

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You are a public company.
You have my money I'm sure I'm invested in

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you in some, some way or another.
How dare you not try to learn how to

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optimize the motivation of people?
You're taking 50% of your profit and

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distributing to people as bonuses.
Run giving them back to shareholders for

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example.
Investing in the business.

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Are you doing this in the most efficient
way?

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And the answer of course is not.
Right?

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And, and I think this focusing on people
work just for money is really a shame,

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because I think people don't enjoy their
jobs to the same degree.

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But I think it's also immoral from the
perspective of public companies.

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There is no question that the largest line
item for any company are salaries.

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Why don't we try to figure out what
actually motivates people?

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Why don't we try to figure out how to get
people to be happier in the job and work

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harder eh, instead of just paying the
money and thinking that would rule eh, the

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day?
Now of course it's good to pay people.

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You should pay people a decent salary and
so on.

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But if you're a public company.
This money's coming from somewhere else.

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And you can, should think about where is
this money coming from.

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I will tell you one more story on this.
I had a student, who told me that he was

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eh, working in a big bank, in New York
City.

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And the year was coming to an end and he
was waiting for his Bonus, and his wife

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was about to give birth.
And his boss did here decided not to give

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him a bonus , or give him a very small
bonus actually.

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But he gave him an apartment in New York
city.

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He was living out of the city and he was
coming in everyday to the city.

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And he gave him his own apartment.
His boss gave him his apartment if he was

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not using.
To use for the, and this way his wife

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could, give birth in the city, this way he
could get home quicker, he would spend

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more time in home, all kinds of things
like that.

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And the guy said, and, and it's been,
quite a few years since, it's maybe been

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12 years and I just met him a few weeks,
and he said that it's really amazing

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because This bonus was really cheap.
If you think about the rent per month for

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the whole year, was much, much less than
what he would have made in a bonus.

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But the gift was thoughtful, and it was
useful, and improved his life in a

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different way.
And he couldn't think about his job from

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that point on in simple monetary terms.
Now we have this bond with this boss.

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He cared about it, he followed this
mutuality, and he was not able to think

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about it just in terms of money.
So when we go back and we think about

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labor, thinking about money is important,
but there's all these other things we need

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to think about.
And I think that if we don't, we're

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actually doing harm, both to the companies
and to the employees.

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The final thought I want to have about
this is this question between Adam Smith

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and Karl Marx.
Which is the question between efficiency

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and meaning.
So, Adam Smith had this very interesting,

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influential story about the pin factory.
And Adam Smith said imagine somebody who's

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doing.
Pins, and there are 12 steps in a pin, and

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if somebody has to do step 1, and then
step 2, and 3, and 4, and 5, and 6, 7, 8,

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9, 12, and then move to the next pin, this
is incredibly inefficient.

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And if you have 12 people, each of them
doing one step, this becomes incredibly

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efficient, and all of a sudden, 12 people
can do hundred times more than what each

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individual could do.
And these are economies of scale.

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These are efficiency.
When people specialize and they state

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doing one specific thing they can become
incredible good, incredible fast in this.

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And because of that Adam Smith said that
we should work like in production plants.

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Karl Marx on the other hand had a very
different idea.

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He said it's all about the meaning of
work.

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That the laborer needs to feel connected.
To its output and its effort and so on,

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and I actually think that before the
Industrial Revolution, they were both

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correct of course, but Adam Smith was more
correct than Karl Marx.

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Before the Industrial Revolution, what
kind of jobs were there they could find

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meaning in?
If you make a pen, sure you could find a

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little bit more meaning, a little bit less
meaning, but the gains of efficiency are

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so large, and the gains for meaning, I
think relatively speaking...

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Are rather small, in, in that world.
However, I think that post the Industrial

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Revolution, and particularly in the
knowledge economy, Karl Marx ideas are

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more important than Adam Smith.
Think about the current world.

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The current world is world in which the
potential for finding meaning in our work

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is tremendous, right?
All of a sudden.

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We're connecting people, we are changing
economies.

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I mean, there's all kinds of things that
meaning could get much larger.

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The meaning of a pin cannot go that much
larger.

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On the other hand, it's much harder to
supervise people.

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Much more difficult to find out exactly
what people are doing.

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Right now in most knowledge work, we trust
employees to do the right thing.

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We can't supervise them and know exactly
what their doing?

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There's a tremendous agency for people to
decide how much to work and how much

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effort.
There's also tremendous value for

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creativity and ingenuity.
And we want people to think about work

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when they are in the bathroom and on the
drive home, and whentalk to their friends

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and so on.
So while we have this tension between

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efficiency and meaning, between Adam Smith
and Karl Marx, I think the tension is

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going more and more towards eh, Karl Marx.
And more and more towards this idea of

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finding meaning as an incredibly important
part of any job.

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And we need to figure out how to find
meaning, and how to search for it, and how

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to help people create meaning, even if it
takes time.

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And even if it takes some money, it's
going to be a useful thing to do.

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[music]