Now, so what this tells us about basketball, is that in basketball, there's
a belief of clutch players, but there's not the reality of clutch players.
Especially not in percentage improvement. And you know what, if we compare
basketball to Wall Street, basketball is actually much more selective.
Many more people want to play basketball, and the basketball league is actually
quite small. Compared to the size of investment banking
for example. And to be one of those 17 people who are
the clutch players, it's a much more self-selected club.
These are people who are much more in detail than bankers.
And basketball is much more mechanical compared to banking.
Right? If you think about it, what we saw was
that bonuses were effective for mechanical tasks and not for mental tasks.
Basketball is partially mental, partially, partially mechanical but banking is just
mental. So with all of these could it be that
bankers are only improving with the size of bonuses that they never get stressed
that they never get those decrease in performance.
I don't think so. I'll tell you one last thing.
When I go to these bankers one by one and I say.
Tell me, what do people do in the office in October, November, and December?
They tell me, privately, that they don't do anything but think about their bonus
and talk about their bonus. That, every day, they pop up a spreadsheet
on their computer and they look at their performance and they calculate their
bonus, and they talk to their friends about what it is and then.
The next day they do it again and again in trying to figure out what will be their
bonus. So even if they don't admit that this is
stressing them out, they certainly admit that this is taking part of their mind
share. They certainly admit it's part of their
thought processes. Time, energy, attention is directed to all
these bonuses and away from actually doing their work.
So, what do we come out to this thinking about bonuses.
Of course we talked about the fact that money is just one of many motivators for
human behavior. But even when we talk about money, money
doesn't always behave. In the way we think it should.
We talked, when we talked about the psychology of money, about how giving
people small amount of money can sometimes backfire, because it could make, change
something from a social relationship to a financial relationship, from something
people do for you as a favor to something they do as a job.
This is the low end. At the high end, we see that bonuses also
don't behave in the way that we think they would.
Sometimes we can give very high bonuses and people try hard, but this fails
because they over try and they over strive, and this pressure and attention is
actually getting them to prefer worse. So when we think about money and about
bonuses, I think we need to think very carefully.
What is this amount of money doing? How is it changing human psychology?
How is it changing the minds of, how it change the motivation?
If we keep on having the view of people as rats in a cage, with very simple rules
between, between rewards and outcome, bonuses and performance, we're actually
going to get things wrong. And we need to truly understand the
nuances of human motivation and thinking. If we want to use money in the right way
to incentivize good behavior and not to get lots of[UNKNOWN].
If you think about everything we've talked today, it's really about what are all the
things that create motivation at the end of the day.
And when we think about motivation, the simplest thing is to think about
motivation is all about payment. We pay people they'll be more motivated.
We don't pay enough they'll be not as motivated.
But I hope that what you think about now is that these equation of motivation
includes all kinds of other things. It's about Meaning and creation and
challenge and ownership and identity and pride and all of those things.
And you can ask yourself and how do we tap all of them.
If we want to motivate people, sure we can do it with payment to some degree, but why
not tap all of those other, all of those other elements.
Why not think about them as well. And I recently got a call from a big bank.
This was a big bank that eh, takes 50% of early profit and distribute them between
people work at the bank as bonuses. And we spent about 2 hours on the phone
and they described to me the 16 equations they use.
To identify how much each person should pay, and they create an equation for how
much money directly they bring and how much they help other people, and there is
an equation for this and an equation for that, and there was 16 different equations
that determine it, and at the end of the day they distributed a heck of a lot of
money to all of these people based on these equations, enough that we went all
over them and we talked about this. I said, what about other things, right?
Why need you ask somebody who, gives a check to somebody for over $5,000,000, to
also give them a hug? Or maybe, invite them for a glass of beer,
or have dinner together? I said, how much would that motivate?
I asked the person sitting in front of me, the person who was in charge of,
compensation, to say, "If you invited somebody for beer How much less you could
pay them and still get them to work just as hard.
And that person said we would never give hugs, and never give beers and invite
people for dinner. I said first of all why not.
Second I said I think this is really immoral.
You are a public company. You have my money I'm sure I'm invested in
you in some, some way or another. How dare you not try to learn how to
optimize the motivation of people? You're taking 50% of your profit and
distributing to people as bonuses. Run giving them back to shareholders for
example. Investing in the business.
Are you doing this in the most efficient way?
And the answer of course is not. Right?
And, and I think this focusing on people work just for money is really a shame,
because I think people don't enjoy their jobs to the same degree.
But I think it's also immoral from the perspective of public companies.
There is no question that the largest line item for any company are salaries.
Why don't we try to figure out what actually motivates people?
Why don't we try to figure out how to get people to be happier in the job and work
harder eh, instead of just paying the money and thinking that would rule eh, the
day? Now of course it's good to pay people.
You should pay people a decent salary and so on.
But if you're a public company. This money's coming from somewhere else.
And you can, should think about where is this money coming from.
I will tell you one more story on this. I had a student, who told me that he was
eh, working in a big bank, in New York City.
And the year was coming to an end and he was waiting for his Bonus, and his wife
was about to give birth. And his boss did here decided not to give
him a bonus , or give him a very small bonus actually.
But he gave him an apartment in New York city.
He was living out of the city and he was coming in everyday to the city.
And he gave him his own apartment. His boss gave him his apartment if he was
not using. To use for the, and this way his wife
could, give birth in the city, this way he could get home quicker, he would spend
more time in home, all kinds of things like that.
And the guy said, and, and it's been, quite a few years since, it's maybe been
12 years and I just met him a few weeks, and he said that it's really amazing
because This bonus was really cheap. If you think about the rent per month for
the whole year, was much, much less than what he would have made in a bonus.
But the gift was thoughtful, and it was useful, and improved his life in a
different way. And he couldn't think about his job from
that point on in simple monetary terms. Now we have this bond with this boss.
He cared about it, he followed this mutuality, and he was not able to think
about it just in terms of money. So when we go back and we think about
labor, thinking about money is important, but there's all these other things we need
to think about. And I think that if we don't, we're
actually doing harm, both to the companies and to the employees.
The final thought I want to have about this is this question between Adam Smith
and Karl Marx. Which is the question between efficiency
and meaning. So, Adam Smith had this very interesting,
influential story about the pin factory. And Adam Smith said imagine somebody who's
doing. Pins, and there are 12 steps in a pin, and
if somebody has to do step 1, and then step 2, and 3, and 4, and 5, and 6, 7, 8,
9, 12, and then move to the next pin, this is incredibly inefficient.
And if you have 12 people, each of them doing one step, this becomes incredibly
efficient, and all of a sudden, 12 people can do hundred times more than what each
individual could do. And these are economies of scale.
These are efficiency. When people specialize and they state
doing one specific thing they can become incredible good, incredible fast in this.
And because of that Adam Smith said that we should work like in production plants.
Karl Marx on the other hand had a very different idea.
He said it's all about the meaning of work.
That the laborer needs to feel connected. To its output and its effort and so on,
and I actually think that before the Industrial Revolution, they were both
correct of course, but Adam Smith was more correct than Karl Marx.
Before the Industrial Revolution, what kind of jobs were there they could find
meaning in? If you make a pen, sure you could find a
little bit more meaning, a little bit less meaning, but the gains of efficiency are
so large, and the gains for meaning, I think relatively speaking...
Are rather small, in, in that world. However, I think that post the Industrial
Revolution, and particularly in the knowledge economy, Karl Marx ideas are
more important than Adam Smith. Think about the current world.
The current world is world in which the potential for finding meaning in our work
is tremendous, right? All of a sudden.
We're connecting people, we are changing economies.
I mean, there's all kinds of things that meaning could get much larger.
The meaning of a pin cannot go that much larger.
On the other hand, it's much harder to supervise people.
Much more difficult to find out exactly what people are doing.
Right now in most knowledge work, we trust employees to do the right thing.
We can't supervise them and know exactly what their doing?
There's a tremendous agency for people to decide how much to work and how much
effort. There's also tremendous value for
creativity and ingenuity. And we want people to think about work
when they are in the bathroom and on the drive home, and whentalk to their friends
and so on. So while we have this tension between
efficiency and meaning, between Adam Smith and Karl Marx, I think the tension is
going more and more towards eh, Karl Marx. And more and more towards this idea of
finding meaning as an incredibly important part of any job.
And we need to figure out how to find meaning, and how to search for it, and how
to help people create meaning, even if it takes time.
And even if it takes some money, it's going to be a useful thing to do.
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