Hello and welcome to our Week 4 Office Hours.
Thank you for all of your questions, and thank you Dan for joining me once again.
>> My pleasure. Is this, is this the last Office Hour?
>> no. We have two more, actually.
>> Two more. Okay.
>> Maybe three. >> Okay.
>> We'll have to check up on that. [LAUGH] Two, two, two.
Two, say the authorities. I'm very glad that you made it back
safely from Boston. Yes I was so I was stranded in Boston.
I, I landed and about an hour later the city went into seize situation.
We're not allowed to leave the hotel. nobody was allowed to be on the street
for quite, quite a long time. all my meetings were cancelled, and I had
no choice but to spend many hours working on the class.
>> [LAUGH] Did you? >> [LAUGH] Yes I did.
So, it's, it's interesting, you know, a couple of things.
First of all, how fortunate I felt to have extra time all of a sudden, which
kind of sets reflection on the rest of my, but.
>> Despite the circumstances also. >> You know, some of my friends they
called me up and wrote me, said, are you safe?.
And I told them, it's probably the safest day in Boston, in a long long time.
It's, it's very sad but when you think about it, the Boston drivers are much
more dangerous than some other actions but, there's this incredible fear that
comes with terror that is, maybe that's why we call it terror.
That is not proportional to the actual danger, and I think if you compare, for
example, driving with terror, there's two things that are different.
One is the intentionality behind it, that you think somebody intentionally wants to
hurt you, and the second thing is there's no way to feel a sense of control.
>> So when you're driving, somebody can just slam into you and you have no, no
choice. You actually had a few experiences.
>> I have, yeah, a pretty terrible one. >> But, but we don't feel this lack of
control in driving. Whereas in terrorism, we, we do feel this
lack of control, that's makes it extra special frightening.
Actually there's these said results that after 9/11 lots of people were afraid of
flying, so they switched to driving. And because of that, actually more people
died than the people who were in the planes.
It's just that our, our fear from actions are different from the things that are
actually dangerous and actually risky for us.
And that's actually one of your assigned readings for Week 6, so you'll learn all
about it [LAUGH]. Just throw that in.
so a lot of people are. >> Is this your polite way to tell me I
don't remember [CROSSTALK]. >> [LAUGH] It's really that you put so
much thought into it. >> I just remember exists in the paper,
that's nice. >> Yes, that's true, thank you.
That was a very nice description. back to terrorism.
>> Yeah. >> Why, what's the psychology
underlying this? What does behavioral economics have to
say about motivation and what can, how do we, yeah, what can we do about it, I
guess? >> So, there's a question of the
psychology of the terrorist. >> Right.
>> Themselves, and then the psychology of the people who are on the receiving
side of terrorism. And then there's a question of what can
we do about it. I, I read a, I read a very detailed
analysis of terrorism a long time ago. And what was very interesting about it
was the, the fact that they were taking these terrorists, I not sure if it
happened in this particular case. But in many cases of suicide bombers, and
they basically isolate them from society, from society for a long time.
And slowly, slowly, slowly they, they tried to create the sense in them that
this is their obligation but they separate them from the regular circle of
life. Because if you kept on meeting people and
doing regular activities, you would it would be very hard to take this extra set
of steps. So they're, they're doing that kind of
separating people from the social circle. And then, of course, there's the effect
on the people who are effected by, by terror and the fear that it's the fear
that it's creating. Now, as a society, it's very hard to.
To do with this, because its a small, small group of people into a tremendous
psychological devastation. And sadly, this is in the area where
technology has only made things worse. So if you think about, you know, 200
years ago, you had a terrorist, what kind of damage they could create.
They could take a knife and maybe kill a few people, very sad.
But, but as technology's increasing, the potential for a few people to create
tremendous damage is very, very high and very, very frightening.
And I, I suspect, and this is just a speculation, that it really is about
social inclusion. So if you think about terrorists as being
isolated in a specific society, and being isolated from the daily environment, if
we can create more social inclusion. That people would be more connected to
other people, see more perspectives and so on, and not to be disassociated from
the daily life of other people. Maybe that would be one one way of doing
it but very, very tough, to, to think about.
And then, the other thing is that we, we don't like media.
If we just wanted to create fear, it is so easy to create fear.
in fact, in the, in this event in Boston, there were cases in which there was
somebody created a fake Twitter feed as if it was one of by the terrorist.
>> Uh-huh. >> And then the people in the police
radio read it and they repeated it and that kind of exaggerated the fear.
So you remember Orson Welles, of course, had these very famous you know, radio
fake terrorist, terrorism event in which he pretended that there was an invasion.
I think now you could do much more damage in this, in this regard.
And then there are other cases. If you look, if you look at the stock
market carefully, there's lots of people who are using misinformation to their
advantages. So in the stock market there's this big
asymmetry where people from companies are restricted about what they can
communicate. But people who are not from companies,
investors are free to say whatever they want.
And many times, they're basically sell short the stock, put fake information out
there and then get, get profits from that.
So, how to, how to think about all of those cases in which people are
disassociate from the social common good is incredibly important.
Certainly I don't have good answers for this.
>> Right. And if you're broadcasting the acts of
the terrorist, is that just playing into what they wanted in the first place?
>> Yeah. I mean there, there, there's a fine line
of where information start and ends and when it creating fear so I, I was in
Boston of course. I listen to the news all the time.
They had nothing new to say. For hours and hours, they would just say
the same thing. But, you know, at some point, their role
is to communicate this information but by just communicating it they're just making
things worse. >> Right.
>> It would be nice if we talked about something else.
So there's a, there's a vicious cycle. And now that we've talked so much about
these terrorism act, everybody knows about it.
So it becomes a standard for discussion and even more frightening and more
worrisome and so on. >> So should we not be talking about it
right now? >> Yes.
>> Yes, we should? >> Let's talk about puppies.
>> [LAUGH] Puppies are great. I'm allergic so.
>> You are? >> yeah.
>> Kittens. >> Kittens too.
>> Kittens too? >> Yeah.
>> Corn? >> no.
>> Flowers? >> Love corn.
[LAUGH] >> Chocolates?
Chocolate, let's talk about chocolate. >> Chocolate Swiss chocolate.
>> Swiss chocolate. >> Only Swiss chocolate.
Actually, let's talk about this weeks topic, which is labor and motivation.
so our first question someone wants you to explain the concept of love as it
relates to the effort that we put into relationships.
So both familial and romantic relationships.
>> Yes, so, that's a very broad, broad question.
I think one simple way to think about effort in love is to think about is it
worthwhile to play hard to get. So the, the expression playing hard to
gets means that. somebody's trying to approach you.
And you basically say, not so interested. And then you make them chase you for
awhile. And the question is, is this an effective
strategy? And I think the psychology behind it is
yes, this is effective. And why?
It's because labor leads to love, so a long time ago, we, we found this not us
but physiologists in general, found this notion of whats called cognitive
dissonance. And cognitive dissonance is based in the
idea that when we do something, we convince ourselves that what we've done
is what we want to do. And if we don't have other explanation,
this reason based logic becomes even stronger.
So Festinger, when he did one of the earlier experiments on this, he got
people to screw nuts into a board, for a very long time.
And some people he paid very little, and some people, he paid very generously.
And then the question was which one of those two groups of people which one of
the, which one of the treatments would get people to recommend to a higher
degree with more enthusiasm, this activity.
Now, think about what happened. You finished doing this for about an
hour. It was a completely boring task.
What happened when you got paid very well?
You say, this was a boring task. I got paid very well, no problem.
How much do I recommend it to other people?
Well, I'm telling them, it's a boring task.
What if you got paid very badly? Now, you have what you call the
dissonance. You say, I did this for an hour, put a
lot of effort into it, but I don't like it so much.
Now, this tension between those things is very uncomfortable.
There are two ways to resolve the tension.
One, you could say, I'm really stupid. I really should have not put that much
effort into it, I should've just put a little bit of effort into it and I don't
like it so much. That's a hard thing to recognize, to
basically criticize or soften this way. So what do we say?
We say oh, I spent an hour on this. I must be the kind of person who really
enjoys it. Actually it must be a fantastic,
wonderful, exciting task. And now, you've elevate the joy of the
task and you're more likely to recommend it to other people.
So if you think about romantic love. If you chase somebody for a long time,
you ask yourself, why did I chase that person?
And you could say, well, it was really stupid of me.
I should have never chased this person. It has no particular good reason to do it
or you could say I must had good reasons, it must be a wonderful person chasing
them was, was was correct. And therefore, you elevate the value of
that person in your eyes. And this is actually the logic of why
playing hard to get is probably a good strategy.
Now, of course there's, has to be some kind of limit to that because at some
point, people also give up. So you want to kind of fine tune the
level of how to get so that people are motivated to work hard but not so
demotivated that they give up. >> Thank you.
>> Functional advice for life. >> Definitely, definitely.
And of course, you all know about the Festinger experiments because you've been
diligently watching Dan's lecture videos. Let's talk about gift giving and
receiving. I know that you're interested in gifts,
because you just recently put out a survey asking the class.
And what do you think how does the effort that someone puts into a gift play into
how they feel about the gift, and how the receiver feels about the gift.
And then also, on the part of the receiver, how does the appreciation that
they show affect the gift giver? >> Yeah.
So, so the reason I'm interested in gifts is that of course they're economically
not efficient. And actually, if you look at it, there's
lot's of start ups out there that are trying to make gifts more efficient.
And you know you have to wonder about how much gifts are about the economic
efficiency versus about the feeling of conveying caring and so on.
So I think gifts are incredibly important in terms of creating social capital, and
get people to care about each other and to actually strengthen their bonds.
And at the same time, gifts are risky. They're risky because we can give things
to people that they hate. So, if I came to your house and I bought
a big gift of something that you have to hang on the wall because I'm going to
come and visit you every year, but you really hate it, it's hideous, right?
All of a sudden, I create a tremendous burden on you.
So, so I think with gifts, we have this notion of efficiency versus something
that is inefficient like money versus a gift.
And then on top of that, we have another dimension which is something versus not.
And I think often especially in the US people opt for the gifts that are.
Have very low risk, but also very low reward.
So people often, when they come to dinner, bring a bottle of wine or candy,
or a cake. These are consumables.
Even if you don't like them, they'll be over.
Now, it doesn't really increase friendship in a deep way.
but it doesn't also has tremendous risk with it.
And I'm actually interested in trying to think about how do we get people to do
more risky gifts. can I get people to, to do stuff that is
could potentially increase friendship but, but try to minimize the, the risk
from it. So can we get people to bring pillows and
furniture and pieces of art and so on, and they could backfire.
I actually get, there were times I get all kinds of gifts from people that I
really wished they didn't give me. But, from time to time, I'm so delighted
that they've given me those things and they keep on thinking about those people
for much longer. Then when somebody gives me a bottle of
wine. so, if, if we think of this, this
connection between easy, thoughtless, no risk and no value and then difficult,
complex, with risk but with potential value.
If you think about this continuum, I think that effort is actually a great way
to move up the scale of value without actually increasing the risk.
If I buy you something and I tell you the story about why I gave you that
particular gift or I describe the extent to which I did.
So, even if I'm buying you a book and I say, you know what, I looked at 17
different books when I was thinking about you.
And the reason I bought you this particular book is not just because the
salesperson recommended it but, I thought about something that I experienced, that
is connected to this book and I thought about what you might experience and how
you might think about this particular author.
By doing that I'm conveying some of my efforts, some of my thought and my guess
is that I would actually make the book better for you.
You would understand where it came from, or why, why you got that.
And without actually having any of the downside of increasing the risk.
So it's not as if I'm buying you something hideous, right?
So I'm buying the same thing. I'm actually elevating the value that
you're getting from it. So it struck me as strange that in many
cases we give people gifts without trying to actually spend time conveying the
value of the gift. How much effort, how much thought?
Why did I give you this particular gift . So if you send something over the mail,
you know just write something about how, how did it started about.
so, so the, if you think about it again, the dimension, I think that effort is
the, is a perpendicular dimension that could just give more, more benefit.
No matter what you give conveying the thoughtfulness is going to be good for
everybody and we should do it more. My birthday is coming soon, by the way,
if you want to, to think carefully about this.
>> I'm well aware. but now I'm curious what the gifts are
that the risky ones that you didn't appreciate so much.
>> So, so, it, I can't say. >> You can't say it here.
[LAUGH] You can tell me later. >> No, I think, I think, I think it
particularly comes to a question of art. art I think it's very tough to predict
what people would like and I got a few pieces of art that I just passionately
dislike. But the interesting thing is, even though
I passionately dislike them, I don't think worse about the person who gave
them to me. I understand that they don't understand
me, which is fine, most people don't and. >> They just have terrible taste in
art[LAUGH]. >> Yeah, but incompatible taste in art
compared to me. >> Right, sure.
but the people who gave me a piece of art, for example, if somebody gave me a
piece of art that is on my desk, I think about that person almost daily because of
that, right? You think about the benefit, I'm not sure
if they want me to think about them but you know, it's a tremendous benefit.
so I'm, I'm very interested about how do we take the social norm of giving
chocolate and, and wine. Which is again, it, it's so mechanical.
Somebody gives you a bottle of wine, you get it and say oh, thank you so much, and
we open it. That, it's, it's almost like a receipt.
The, the, it becomes transactional. How do we make those meaningful,
meaningful gifts is, is incredibly important.
I I should point out that when I had my first friends who had kids, I, I would
give them gifts for their kids that would make their lives miserable, so I would.
>> Oh! >> I would buy them, I bought them a
big trampoline that the kids love, but of course they took a tremendous amount of
space. And I, I bought the kids a drum set,
which of course. >> Oh my god.
>> Was great fun for the kids. I, I've learned to think differently
about gifts for parents once I had my own kids.
>> [LAUGH] Things that don't create noise, maybe.
>> Yes. >> And so, what about the other side of
gifts? >> When, as the gift giver, the
appreciation that the recipient shows, how does that influence?
>> So, so, this is tremendously important.
So, so gifts, gifts are really about the bond between people.
It's kind of an investment in friendship and you want the investment to be two
directional. You want to do something for the other
person and then you want them to appreciate you back.
I think sometimes there's a, there's a risk that gifting is kind of an
escalating game in which if you give somebody a gift and then they remember
what kind of gift you gave them and there's a need to do it back.
the, the, American, I've never gotten very good at writing thank you notes, but
I think thank-you notes are actually wonderful.
If, if you just write a standard form, not, not very interesting but, if you
write a thoughtful thank-you note about why do I appreciate that and how it's
going to fit in my life and so on, I think this will be a great, great gift.
As a rule, I would say you probably never want to give somebody a gift that they
don't have a good reason to write you a thank you note for it.
If you're going to give somebody a gift that you don't expect a thank you note,
you probably should give something else. >> All right.
Good to know. and so what about regifting?
Let's say you get something of really high value but you don't really nee d it,
don't have a place for it. how could you give that to someone else
without conveying the fact that you got it for free but also not you know.
>> Yeah. >> Giving them the pressure to
reciprocate at that same level. >> Yeah, so, so regifting is terrible
problem because there was the, the chance that somebody will say this is something
that you don't like personally, right? And you think that for some reason I
would, >> Mm-hm.
>> I would like it. So I think there's some, there's some
cases in which regifting could be, could be okay.
If you have shoes that are the wrong size for example, I, I don't think anybody
would feel that this is wrong. But if you had a piece of art and you say
you know, I really hate this there's no way that I could do it but you really
have an inferior taste, I think this would be good for you.
So the, there are cases in which regifting is talking about the particular
lack of suitability of that gift and me, and then I think regifting could be okay.
And there's a case of regifting that has kind of a hierarchy of taste, which is
incredibly problematic. The easiest case for regifting is a case
in which you say I have something like this already, so now you're not conveying
anything. In fact, you're saying I have, I got two
of those things at the same time, I love them.
I've learned how wonderful they are so I'm, I'm giving it, I'm giving it to you.
[COUGH], there, there's another version of trying to create regifting, which is
a, a less of an act of giving. So if I take something and I, I got it as
a gift and I don't like it so much, and I come to you and I say, hey this is a gift
for you. that's, that I think is a very
problematic set of actions unless I could say, I got two of them and so on, it's
not my size. but I think there could be a version in
which I say, here are the things that I have that I don't find a current need
for. I have an extra jacket.
I have some ski poles. I have all these things that I don't
really need. And if you as my friend is interested in
any of those things I would love to give them to you.
That's a different version of, of giving. You're not taking the act of giving as it
is, and saying you just don't care so much about me.
In fact you're saying here are things that if you're interested I'm happy to
give them to you and, it's a very different exchange but I think it will
have a similar connection and a, a similar increase in the bond between two
people. Because all of a sudden I have something
that you're not pretending you like me and you're giving it to me and you've
thought about me and so on. It's just something you don't have use,
and if I can think that I will have a good use for it, that's actually
beneficial. So I, there's actually startups that is
trying to work through Facebook and similar things, and basically say could
everybody that has extra stuff. Just say here's the extra stuff I have I
don't really need. if you are one of my close friends.
You're very welcome to use it. And I, I suspect, I don't know if it is,
but I suspect it would actually increase social, social capital.
And you could give in that way things that you could never give in a direct, in
a direct way. So I, I'm, I'm hopeful, I'm hopeful that
gift giving is actually going to improve, that the, the Internet social networks
and so on, are going to help us do it in a, in a better way.
Less in a way of, of giving people meaningless stuff and more in the way of
creating social connections. Trying to think, what's the best gift
you've got, can you think about that? >> Well, last year for my birthday, I
got this really fancy knife. It was an excellent gift.
>> Isn't it, aren't you not supposed to give knives to people?
>> [LAUGH]. >> Is there like a bad luck connected
to this? >> Dan gave me a knife last year for my
birthday. [LAUGH]
>> [LAUGH]. >> That's the context.
>> I told, I, I, I thought there was an, somebody told me that there was some
bad luck connected to giving. >> You know, I've never heard that but.
>> Right. >> But it is my favorite knife.
>> Okay. >> And its really wonderful.
I've only cut myself actually still have some scars from it.
>> Yeah, yeah. I think that good gifts are things that
you would use frequently. >> Uh-hm.
>> But you don't feel comfortable buying it for yourself.
>> Right. >> These are the kind of ideal gift.
That's my my principle so far. >> Yes, I would never spend that much
on a knife, so thank you. [LAUGH] so, we're going to switch gears
here a little bit. Let's talk about payment systems and
salaries and so on. What do you think the right interval for
paying employees is? >> In terms of timing?
>> Right, yeah. So you can pay someone by the minute
presumably biweekly, monthly and you know, yearly?
>> Yearly, so I think it has to do with the society we live in and the interval
of expenses. So in a very basic way, I think we need
to have some symmetry between when you get paid and when you get expenses.
And when the symmetry is high, people can organize their expenses and think better
about their money and how much they have and how much they don't.
So, so part of it is having this, this fit between the system.
So many things in the world happen on monthly system, your monthly mortgage,
your electricity, check and so on. I think it would have been great if all
of those happen on the same day, and it all, all happened on the same day or the
day after when your salary came in. So that's for the functional use of
understanding your income and your expenses.
Then there's the issue of daily expenses by coffee lunch and so on.
And from, from a planning perspective, it would have been very nice if it had a
stream of income. So, there's some really beautiful
results, showing that if you pay people on the biweekly schedule, for example.
People spend way too much on the first day when they get the salary and then
they run out of money toward the end of the period.
So, I would've liked to create a system in which we pay people part of their
salary on the monthly basis in the way that fits all of their expenses.
And then another month we would pay them on a daily basis.
And I think for example, it would be nice to have a debit card that every day you
get extra money on that debit card. And that would help me plan, if it was
me, it would help me plan how much I can spend on any particular day.
Then, you would want a part of the salary to, to go to long term savings.
So, from, from this perspective, you know, from the planning perspective, you
say, well, how's my flow of income going to be connected to my flow of expenses?
And then finally, there's a question of happiness.
It was a question of how do you get people to use their money in the way that
makes them, makes them happy. And for that I think that bonuses are
actually very good. so usually when I ask my students, I say
what would you rather have, would you rather have a fixed increase in salary or
a, a bonus at the end of the year? Most people say if the amount of money's
roughly similar, I prefer the monthly expenses.
I can, you know, save and so on. And then I say which one would make you
happier? And people say, oh yes, if I got a bonus
I would actually be happier. Why?
Because if the money would come in specific intervals, we'd probably
increase the quality of our life in a fixed way, buy a slightly bigger home,
slightly bigger car, something like that, spend more money on groceries.
But if money came as a bonus, I would probably feel more free to spend it on
things that are happiness increasing, buying a new bicycle or something like
that. But then again, if a bonus comes at
expected time every year, you start building on it and planning on it, and
that's not as, as useful. So I, I would think about two separate
issues, I would say how do you give a salary in a way that helps people manager
their money. And then how do you give a bonus in an
unpredictable way that makes people happier.
And that bonus I would try to give probably in three ways.
I would probably try to give part of it in money.
I would try to give part of it in gifts and I would try to give part of it, as
Mike has talked about, in allowing people to give money away So that will be kind
of my idea of the salary structure. We are not there yet.
>> No. Then let's go there [LAUGH].
>> Very good. >> that's actually a very nice segue to
our next question about big bonuses. >> So bonuses, sure, are great, but you
talk about the down side of really huge bonuses, especially in the financial
industry. >> Yes.
>> How do we deal with this culture that is perpetuating?
It already exists. It's there.
People expect their big bonuses. Now what?
>> Yeah. So, so cultural changes very, are very
tough, and they're particularly tough in a competitive world.
And they're particularly tough in a competitive world in which everybody who
gets paid with bonuses want to get paid with bonuses.
So, you know, if you, if you think about banks and you think about the boards of
these banks are built by people, other banks and it's kind of a closed system.
Why would they ever, why would they ever switch?
and I think it's one of those cases which can be incredibly tough for any
particular bank to start doing something differently.
And that's where regulations come in. Regulations come in where you have a
solution the, of a coordinated system that is just not bad for the whole, for
the whole system. and I'll give an example of this, there's
imagine a game called the public good game.
you have ten people around the room each of them has $10 and each of them can put
as much as they want in a pot. If they, nobody sees what they put in,
but the moment they put in all the money, the money grows by let's say twice, and
then the money is divided by everybody. So if we have ten people, each of them
can get $10. Everybody puts in $10, $100 grows to
$200. Everybody gets 10% of it.
Everybody gets $20, that's great. But imagine if one day you decide not to
put your money in. What happens?
Nine people. Everybody puts their money in, $90 grows
to by twice, $180 dollars, divide by 10, you get $18 dollars, but you also get
your 10 dollars. So you get 28, you get your benefit.
What happens? For a while, everybody behaves nicely,
everybody puts their $10. And then one time somebody doesn't, and
then the other people say hey, how come I only got $18, and then very quickly
nobody puts anything in. And, and this is a situation which if you
let the system decide by itself how it does, it can actually deteriorates to the
disadvantage of everybody. And I think that's probably a good
analogy for what happens in the banking. can you be the first bank to behave
nicely? No.
Right? It will be very hard because the bankers
who work for you will say we prefer to work for other banks and get paid better.
The fact that we understand that big bonuses don't work don't mean that people
don't want them. If somebody would offer me at the
university to get paid, you know, an extra 90%, 900% of my salary as a bonus,
I wouldn't say no. Now, it might not be good for the
university, but for me personally, right. Even if it's not that effective and it's
not good for the system, it's good for me personally and if I get to choose my own
salary. So this is the kind of case where it's
actually, we need collective action. We need to government to come and say we
need everybody in the system and we're just forcing you to behave differently.
Now, will this happen? I have very little faith that this would
happen. So, what I'm hoping, what I'm hoping is
that there will be a new kind of banking that would emerge from consumer demand.
I'm hoping there will be some organization that would say, we're going
to create a new type of bank. And we will have fixed, reasonable
salaries, we would not have conflicts of interest, we will be straight forward
about what, what we're doing. And, and that this bank would be created
out of spirit of Importance, understanding of how crucial banks are,
and some kind of mission and commitment. And I think a bank like this could draw
substantial talent. Because after all, we don't think about
bankers as evil and there's lots of people in the world who want to work in
all kinds of fulfilling jobs. Banking has kind of taken personal
fulfillment mostly out of the system. But it doesn't mean it has to have no
personal fulfillment in a sense of mission.
And I think that once a bank like this would be created, many consumers will,
will start moving to it, creating pressures on the other bank.
I'm, I'm at least hoping that this, this would happen.
It's not going to be fast, and it's not easy.
And actually, sadly, the regulation on banking in the US have made this, a kind
of action like this is more difficult because now the requirements on banks are
making it harder to open a new banks. But I'm still hopeful that something like
this would emerge. >> I actually just read a paper on
salary caps, where the researchers were asking people what they thought about
salary caps. And at what point it would be appropriate
to say okay, you've already made $20 million, you're done.
>> Yeah. >> how do you feel about that?
>> I, I think I'm not sure what, what rule I would use on salary caps.
because I, I want something that that seems a fair and just and you know
salaries at those levels, salaries are not so much about the money, they're
about appreciation. it's, it's kind of a game of accumulating
money but also accumulating a sense of thankfulness and, and, and reciprocation
and so on. so I, I think that if the rule was just
about the salary cap, I, I, I worry it would not represent correctly the spirit
of. The connection between employee and
employer and the CEO and so on. So I, I think we need to have a rule
that, that takes into account mutual respect and understanding.
And but, but if it was just a salary cap and externally imposed, like, like the
minimum wage but on the opposite side, I I think it would make the whole thing
looks much more mechanical. I, I would much prefer to say let's think
about other attributes of the job. Let's think about how much of the, lot's
of companies have to give money to foundations, and give money to charity.
How do give the CEO of a successful company a bigger say in where this money
goes? how do you let them do more intervention,
opening new departments , getting more reputation, calling your building on
them. I mean there's lots of things that you
can do that are not just about pure money but actually has recognition of time and
effort. You know, when I meet CEOs, you know,
often, often, not always, but, but, often I'm impressed with their commitment, care
and I think to say that these CEOs just don't care, they're just there for the
money is a very strange thing. So I would much prefer to take activities
and dimensions are away from just focusing on the salary is there long term
benefit. I've always wanted to do this thing with
teachers where you would ask students after they leave school, after they're
18, once a year. To write a letter to one teacher that has
influenced your life. >> Mm-hm.
>> and I thought, you know, what would happen to teachers who, who get these,
these letters. You know, you know I, I, I teach all the
kids but you know, I teach it and from time to time I get emails from my
students. And it's always really delightful to, to
know what, what happened to them and have they used a particular fact in, in one of
their activities. But when I think about elementary school
teacher, middle school teacher, high school teachers, I think they probably
almost never get the realization of what has happened.
And partially, it's hard to learn in that environment.
Imagine you had a kid like me. As an elementary school teacher my, my
elementary school teacher weren't happy with me[LAUGH].
>> [LAUGH] No? Not the ideal kid but I think knowing
that appreciating in retrospect and knowing that things have not, I did not
become the juvenile delinquent that they expected.
I think with both give, give them a sense of accomplishment and also a, a different
way to view difficult kids. >> Yeah.
I actually just wrote my 7th grade science teacher a couple months ago.
>> Oh, very good. >> Telling him I appreciated him and it
was a great class. >> That's good.
>> And I still remember all like kingdom phyla, all of that.
yeah, so. >> That's great.
>> Some people do. >> Great.
>> and more people should, I guess. >> Yep.
>> That's the lesson. >> let's talk a little bit about the
IKEA effect. What do you think the impact of time has
on the IKEA effect? So, you've created something, you think
it's really awesome and then over time does that diminish?
Does it grow or do you know? >> So, I don't know but I can speculate
of course. >> [LAUGH].
>> And so, so I think it's a lot like other effects over time.
What the question is what happens in this time?
So, so think about something like emotions, all right.
You get angry or you get happy, to happy or angry, and then if you do nothing, the
emotion will just go away. But if you do something in the middle,
when you're happy or when you're angry. That memory of that action can stay with
you, much like Festinger's story. So imagine a case in which you're, you're
you're very happy and for some reason, you decide to start donating money every
Friday. Or you decide to open a, a savings
account, or you're very happy and optimistic and you decide to, to do
something. You, you register for a gym.
So, so your happiness, or misery, can translate to a decision, and then you
probably don't remember how you felt and what caused you to behave that way, but
that decision to, could start have a life of its own.
And, and I think the same thing can happen with the IKEA effect, that you
build something and so on and if you just forget about it, the effect would go
away. But if you, something happens in the
middle which reminds of it then you keep using it and so on that will have its own
activity. So for example, I think that if you build
shelves in a room that you don't, like in the garage, you don't ever look at, the
happiness would go away. But if you build something that is going
to be in use daily and you remind yourself about it then.
Then the repeated use will probably remind you.
So probably things with drawers are better to create.
Because yo keep on, you keep on using them.
Probably things that are in the more central place in the house.
are more useful so from that prospective you can think about what do they, things
that you reuse. Often would rekindle your memory of
creating it. Maybe you need to sign it, if you do
something you draw you should sign it. >> Or something you wear like jewelry.
>> I think if it's something you wear all the time, you would probably forget,
but if you put it on and off, that would be good.
If it's something that you wear on special occasions.
All of those would be very good. >> All right.
>> Jewelry by the way, it's probably a, a very good gift as well.
Especially if you helped created it. >> Mm-hm.
>> Or thought about it. >> So think about things that other
people make, for you. Let's say you are in a restaurant and you
see the chef create it before your eyes. Or you get a, a cocktail and it's made.
Does that increase your liking of that as well?
>> absolutely. So, so all of a sudden there's a, there's
a whole sort of other mean, meaning that you can attribute to it so, if you think
about a drink, a drink is a drink. You, even if you don't think about it,
there's no, nothing much to enjoy, you're just consuming it.
But anything that gets you to slow down, think about it, reflect on it, have some
extra voice in your head going over it, it is actually going to increase the
enjoyment of it. >> Mm-hm.
Speaking of drinks one person wants to know, how you choose wine.
>> How I choose wine? >> Yes.
Do you drink wine? Do you like wine?
>> I do drink wine, I like wine, I'm a, what you call a cheap date
>> [LAUGH]. >> I can usually drink about one, one
glass before I become slightly tipsy and a glass and a half and then it's over.
>> It's true. >> [LAUGH] how do I choose wine?
I am perfectly willing to accept the fact that I don't understand wine.
I I try to enjoy it never the less so I swirl, I smell.
I think that all of those things that slow people down are really good things
so I try to you know. I have know idea what tanning complexity
means but I use this thing I think to myself you know what's the acidity,
what's this? you know, I think you can enjoy tomato in
the same way, right? You can slow down and think about a
tomato and say what's the acidity, and the freshness, and the tartness and so
on. So I basically recognize my lack of
understanding of wine, at the same time I try not to consume it without thinking
about it, because I realize that thinking is going to be better.
Sometimes I choose wine that people have an interesting story about this.
so I went with a group of friend to a local restaurant and the waitress talked
about a particular wine that came from an island and she talked about how this
island, they also have. Lime is growing on that island and
because it's an island and with lime. There's a, the limeness actually get into
the wine. I think it's a crazy idea, the idea that
there are [LAUGH] lime trees on this island and because of that it somehow get
into the wine. I just can't imagine that there's any
molecule from a, from this line that entered that.
But, and you know what, and she had this story about an island and how, because
it's an island, she had some other crazy stuff.
but you know what, I enjoyed the story. So, I, I got that particular wine and I
can't imagine it's a real story, but here's a way to enjoy wine and think
about limeness and could I detect any lime and
>> Now-- >> Did you?
>> No. >> No.
>> you know, it was, it was tart, interestingly it was tart.
And, and, and the island story, so, so I, I like, I like wines with strange
stories, partially because I get to think about them afterwards.
Otherwise if you just get Bordeaux, you know, they're all the same, nothing
against the French. But if you get Bordeaux, it's all the
same, there's not unique stories about the wine, you can't separate them.
But having a unique story about the wine from something, somewhere different, then
you get to think about it a little differently, I, I do.
So I. Cheap wine, relatively cheap, I don't,
have a particular reason to spend more, more money on it, because I don't really
think I understand much, with a good story.
>> All right. >> Those are my,
>> And it, we actually hosted a wine-tasting with Bordeaux.
>> Yes. >> And at the time, we thought they
were very different. >> Yes[LAUGH].
>> So, anyway, do you have any tips for motivating yourself?
How are you, presuming that you are so productive, how are you so productive?
>> How am I, Productive. So, so I think part of the, the story is
trying to sleep very little and drink a lot of coffee.
That, that that really works. so, so I, I try to think about So, so,
the thing about, in general in social science, you know, we find lots of really
sad facts, right. We find the people are myopic and
vindictive and emotional when we find how people make mistakes all the time.
And in many ways, it's kind of sad realization.
I, I try to motivate myself about thinking how we can fix it.
So, my personal (no period) passion is to try and improve how things are and I keep
on thinking about all kinds of stuff in life, it's just a, just a human waste.
There's all kinds of things I just, wish they were different.
And I see my goal is kind of documenting and finding the things we're not doing
well, and then try to figure out how we fix it.
And From that perspective, I feel very connected with the, with the larger, with
the larger mission, right? So we have people doing all kinds of
wonderful things around the world. If we could only feed them with better
understanding of what they should be doing, they would, they would do a better
job. So think about the, the impassive system
in in Kenya this is a mobile payment system that lot's of people are doing and
we're hoping that many more people in rural dist, rural places could, could
start using them to empower them financially.
Right, if we only understood the psychology of money better could we build
better system like this. You think about health care system.
So I I see so many things being wrong and I think that if we understood each of
them a little bit better we could do better and that for me really motivates
me. So I guess the, the answer is that I see
a long term objective that is really promising.
And I can see how even small steps in that direction, I don't think we need to
solve healthcare. even small steps could, could improve,
improve lives. And then, does it, does a statement in,
in a Jewish tradition basically said. if you haev saved the single life which
is if youve saved the whole world and i try to think about that as well you know
theres a question of solving things and theres a question of improving and i i
think if you said can we solve global warming Tough, hard to get motivated by
that. Can we get people to behave slightly,
slightly better and, for me this perspective of trying to save one thing
so, I give lots of talks in hospitals, and, and my usual motivation is to say,
if I could only get one doctor to treat one patient better, that, that's a great
>> accomplishments. So maybe I guess the, the answer is I
have low standards. I, I think, I think ev, I, I look at even
small steps as achievement and that really motivates me.
>> Right, no. Taking one thing at a time I think
that's, I think that's a good way to do it.
so this, this next question I think you might have some important insights into
because you spend a lot of time traveling.
>> Yes. >> How can you maximize your time on an
airplane? >> Ok, maximize.
[LAUGH] >> You know all about airplanes.
>> Yes, I know a lot about airplanes, and airports, and security lines.
So, so for a long time I would try to work on the airplanes.
And I actually thought having no internet connection was a.
Was a good environment. and I still think at the time when I was
not traveling that much, I would basically try to take a single task that
would take me about half of the time of the flight and try to focus on that.
for me it worked a little bit better to do it on paper than on the computer
because paper you could have out all the time.
The computer they tell you to close it and open it and then the person in front
of you leans back and so paper was helpful.
The other thing that is interesting about paper is that when you work just writing
or editing on paper I, I get a better sense of progress.
Actually,if you think about, in a bigger schema, I'm digressing for a second, but
if you think about it in a general way, if you write something and you just write
electronic documents, and let's say you edit in something 50 times, you get the
last version, and you say, why didn't I just write this one to start with?
but of course you couldn't have written that version to start with.
You wrote the first version, you edited it, understood it differently and so on
And the process was important. And I think in the days when people wrote
by hand, you would have kind of a trace of what you did.
We just lose the trace right now because we right on top of things, or we edit on
top of things. We don't see what we've learned.
We don't think what we've accumulated. I think it will be kind of interesting if
we. Try to write a word processor, that would
remind people about what they've learned throughout the, throughout the way.
Or think about all the editing you're doing, right?
How is a, what have you learned? What, what have you figured out?
And could we create a trace that helped you eh, understand all the steps you went
through and not just the final, the final eh, version?
So And so I think there is something useful about this sense of progress, and
understanding your own, process, of improving over time, and, and we lose a
lot of it in electronic editing. But, so working on paper for me, actually
give me a sense of A a essence of progress you get to go over a page and
you get the next page and see the numbers of the pages I know that electronic
documents have pages as well. It just doesn't give me the same and the
same sense so for me a printed an essence of progress is helpful.
Also because flights are basically unpleasant.
I think when I was a kid I enjoyed flying, but it, it, it, becomes
unpleasant very quickly and I, I try to also make sure I don't work all the time.
I try to do something fun, so Usually I download something on my iPad and I try
to make sure I work some of the time, and I watch some of the time.
Actually, the first flight I ever watched something on was a flight to China.
This was quite a few years ago and I downloaded a TV show called 24.
It was the first season, and it's a TV show that Suppose if it takes 24 hours in
the straight shots, but there some commercials of course so every hour takes
45 minutes or so and, and I started watching this and its, its, its, its fast
phase and every chapter ends and you really want to watch the next one so, on
TV I guess you have to wait a week[UNKNOWN] but
>> [LAUGH] Not watching Netflix. >> Not on Netflix.
And it was an amazing sight, because I would fall asleep, and you know, kind of
half waking up in the flight, not knowing exactly where I am, and my dreams were
connected of, all of these activities that happened in this series and where
was I, and I, you know, confusing, really, really long flight confusing
>> Which was an amazing emotional activity, where, where my whole flight
was consumed with this experience of a new, strange place, partially sleeping,
partially not, dreaming about this ex- -- it was really a very disturbing but very
magical way to experience a flight. >> So you felt like you were right
there with Jack Bauer -- >> I, I felt, I felt I was --
>> -- fighting crime? >> Some worry that in that arena
experience, seeing something strange as well.
>> Interesting. Alright.
can you speak about using gamification in the workplace?
Do you see the pros and cons of this and, you know --?
>> Gamification is a very nice Term. [UNKNOWN] is the way that computer gamers
look at human behavior, and computer gamers basically have to take something
like playing the computer and get people to do it or hours with no pay, right?
That's their task. And they're basically rediscovering lots
of principles from psychology, so, things like random reward or accumulating points
or feeling of progress, competition, and so on.
And if you think about that it's basically tapping all the other aspects
of human motivation that have nothing to do with money.
And right now we have games that have gamification but the amount of
gamification in daily life is not that high.
And I think there's huge potential to actually increase gamification in daily
life. So, we're doing it in some ways.
So, you can have a wristband that's measuring how much you walk, and you can
do. A competition based on that but I think
there is a tremendous potential for adding other aspects of human motivation
in to the workplace that are not as easily, have not been this easily
measurable displayed and compare so the key to gamificaftion .
Is to get fast reward for all kinds of things you're doing.
To get a sense of progress, to compare things to others.
I think there's lots of eh, potential benefits there.
Eh, the, the downside that I think could happen is how do we think about
competition. So, one of the things we know about.
One of the best ways to improve education is to get the good teacher in the school
to teach the not so good teacher. One model of teachers is just to say the
bad teachers are lazy. Another model of teaching is the bad
teachers, or the not so good teachers have not figured out how to teach well.
So if you take the good teachers, you can get them to impart their skill and
knowledge and, and tricks, and tho-, those people who haven't figured out for
themselves can actually become better teachers.
And there's a risk that some ramification is going to eliminate collaboration.
So, when we do Gamification. There's a question of how do we view the
role of the individual versus the group? And I think there are many cases in
which, for example having individual scores could decrease collaboration and
help between people. So when we think about gamification we
need to be very careful to create the right incentive to get the.
A, a right, right outcome, and, because[INAUDIBLE] in general would
measure many more things, in, in the work place, eh, the risk of moving to this
quantified approach, eh, is very risky >> I mean the, the, the risk it will
measure the wrong things, and motivate bad behavior is very high, so we need to
think about it much better. when we think about incomplete contracts,
for example say you work for me, you. >> In this hypothetical world.
You basically know what are the kind of
things that will be good for the lab, right?
And you're going to do them, but But if I start gamifying part of your behavior and
not others, it, it could have the aspect as, as money, in which you're just going
to pay attention to some things and not others.
So whenever, whether it's money and so on, we, we talked about in the psychology
of money where, where, where you create some specific incentives you have to
worry about eliminating the overall >> goodwill toward the workplace.
>> Right, right, right. Okay, I have one more question for you.
>> One more question. >> And it is, can you explain the magic
behind prices ending in nine? >> The magic?
Did I ever show you my magic trick, by the way?
With the cards? possibly
>> i have a wonderful magic trick >> want to do it now[LAUGH]
>> maybe next time >> someone get the cards next time
>> next time so the magic with 9 so the ending of 9 is actually a big mystery and
theres lots of thoughts about where this came from.
Originally in the US, the 9 ending were for accounting purposes.
So, there were no computers and there was a question of how long have items been on
display when it's time to switch them? And they would basically use the last
digit as an indicator of how long something has been on the floor?
So imagine that something in their when new items come in, they end with zero and
then a month, a week or two later, we put one and then two and three and so.
And nine actually used to be the number that was, okay, just before we get rid of
that, but in the prices went, went down as well.
So, in that time there was actually a reason In infer something about nine.
Nine meant something as being around for a long time, there's a good chance being
discounted from the time that it first comes on the floor, before it's it's
living up. this is no longer necessarily the case.
But somehow this perception of nine as being eh, on discount, is is increased.
And there's some really nice Research on that and there's some papers looking at
catalogues and what they show is that of there's one item endign in nine, people
say, "This must be on a discount", and by the way, prople buy that item more even
if the price increases from about, increasing let's say from $44 to $59.99,
so the price could increase but if there's one item like this, people say,
"This must be on discount, it's such a unique different price."
But if the whole catalog ends in 9, now there's no signaling value for this.
So, so one thing is about what people think that the 9 ending signals.
And people think, kind of somehow intuitively, I'm not sure it's because of
history, I'm not sure if the history, the reason they use 9 was because that was
the natural way people interpret price, but there's something about the
>> This 9 is a special deal. and the other possibility, and there's
some evidence for that, is that people just don't count it correctly.
So 1.99 is a, is a, is 2 -- >> Almost.
>> --[INAUDIBLE] but it's almost 2. So what happens when we have 50 items
that are each 1.99? How do we count that?
correctly. And we did a little study we asked some
undergrads to go to a few of the grocery stores around here, and we asked people
as they ring things through the cashier to how how okay big do you think your
basket is? And in terms that people think their
basket is less, I mean we basically found this big effect people under estumae
They, their basket and even the cashiers were expert in this, underestimate the
basket. And and I thin it's because we count the
dollars a lot and we kind of don't really count the cents so much.
This is the strongest with 1.99 compared to 1.77 and so on, so we lose some of
this. So I think both of those things happen,
there's a singling element >> And then on top of that, there's
this discounting or lack of counting element as well.
>> All right. Thank you, Dan.
>> My pleasure. >> And thanks for watching.
Bye-bye. [NOISE] Alright we found some cards.
So Dan is going to show you guys his card trick.
Okay, so, I've, I've three cards. Okay?
And I'm going to give you this pencil, and I'm going to ask you to start tapping
these, okay? Just tap them gently.
Slowly. And what I'm going to do is I'm going to
focus >> And I'm going to transmit to you
with my thought, in terms of where I want you to stop.
Okay? So I'm starting.
>> And your eyes are closed. >> My eye, that doesn't matter.
I'm transmitting here. When you feel like I've told you which
one to stop, stop on one of them. Are you sure?
Absolutely sure? >> Perfectly sure.
>> Yes. >> Did you, Did I tell you anything at
the start about this? >> No.
>> Is this by your own accord? >> Yes.
You feel like you decided.
>> I did decide. >> You see this brown envelope?
>> Uh-huh. >> Please open it.
>> It's a manila envelope, but I will open it.
>> Okay, and what does it say? >> What?!
>> Show it to the camera, what did it say?
>> Stop. >> Show it to the camera, what did it
say? >> How did I do it?
>> Well, I'm actually not sure. [LAUGH]
>> This is, this is, this is the trick. Isn't it good?
>> Can we do it again? [LAUGH] This is my favorite magic trick
by the way. Are you impressed?
>> I'm kind of annoyed. [LAUGH] OK, yes, I'm impressed.
>> Very good. Thank you very much.