TO TRY TO get a feeling for how a high salary might change your behavior and influence your performance, imagine the following thought experiment: What if I paid you a lot of money, say $100,000, to come up with a very creative idea for a research project in the next seventy-two hours? What would you do differently? You would probably substitute some of your regular activities with others. You would not bother with your e-mail; you wouldn’t check Facebook; you wouldn’t leaf through a magazine. You would probably drink a lot of coffee and sleep much less. Maybe you would stay at the office all night (as I do from time to time). This means that you would work more hours, but would doing any of this help you be more creative?
Hours spent working aside, let’s consider how your thought process would change during those critical seventy-two hours. What would you do to make yourself more creative and productive? Would you close your eyes harder? Would you visualize a mountaintop? Bite your lips to a larger degree? Breathe deeply? Meditate? Would you be able to chase away random thoughts more easily? Would you type faster? Think more deeply? Would you do any of those things and would they really lead you to a higher level of performance?
This is just a thought experiment, but I hope it illustrates the idea that though a large amount of money would most likely get you to work many hours (which is why high payment is very useful as an incentive when simple mechanical tasks are involved), it is unlikely to improve your creativity. It might, in fact, backfire, because financial incentives don’t operate in a simple way on the quality of output from our brains. Nor is it at all clear how much of our mental activity is really under our direct control, especially when we are under the gun and really want to do our best.
NOW LET’S IMAGINE that you need a critical, lifesaving surgery. Do you think that offering your medical team a skyhigh bonus would really result in improved performance? Would you want your surgeon and anesthesiologist to think, during the operation, about how they might use the bonus to buy a sailboat? That would clearly motivate them to get the bonus, but would it get them to perform better? Wouldn’t you rather they devoted all of their mental energy to the task at hand? How much more effective might your doctors be in what the psychologist Mihály Csíkszentmihályi called a “state of flow”—when they are fully engaged and focused on the task at hand and oblivious to anything else? I’m not sure about you, but for important tasks that require thinking, concentration, and cognitive skill, I would take a doctor who’s in a flow state any day.
A Few Words about Small and Large Decisions
For the most part, researchers like me carry out laboratory-based experiments. Most of these involve simple decisions, short periods of time, and relatively low stakes. Because traditional economists usually do not like the answers that our lab experiments produce, they often complain that our results do not apply to the real world. “Everything would change,” they say, “if the decisions were important, the stakes were higher, and people tried harder.” But to me, that’s like saying that people always get the best care in the emergency room because the decisions made there are often literally life and death. (I doubt many people would argue that this is the case.) Absent empirical evidence one way or the other, such criticism of laboratory experiments is perfectly reasonable. It is useful to have some healthy skepticism about any results, including those generated in relatively simple lab experiments. Nevertheless, it is not clear to me why the psychological mechanisms that underlie our simple decisions and behaviors would not be the same ones that underlie more complex and important ones.
CARING AS A DOUBLE-EDGED SWORD
First Knight, a movie that came out in 1995 starring Sean Connery and Richard Gere, demonstrates one extreme way of dealing with the way motivation affects performance. Richard Gere’s character, Sir Lancelot, is a vagabond expert swordsman who duels to pay the bills. Toward the beginning of the film, he sets up a kind of mini sparring clinic where the villagers pay to test their skills against him while he dispenses witty advice for their improvement. At one point, Lancelot suggests that someone out there must be better than he, and wouldn’t that person love to win the gold pieces he happens to have clinking around in a bag?
Finally, an enormous blond man named Mark challenges him. They fight furiously for a brief time. Then, of course, Lancelot disarms Mark. The latter, confused, asks Lancelot how he managed to disarm him and whether it was a trick. Lancelot smilingly says that that’s just how he fights, no trick to it. (Well, there is one mental trick, as we discover later.) When Mark asks Lancelot to teach him, Lancelot pauses for a moment before giving his lesson. He offers Mark three tips: first, to observe the man he’s fighting and learn how he moves and thinks; second, to await the make-or-break moment in the match and go for it then. Up to that point, Mark smiles and nods happily, sure he can learn to do those things. Lancelot’s final tip, however, is a little more difficult to follow. He tells his eager student that he can’t care about living or dying. Mark stares into his face, astonished; Lancelot smiles sadly and walks off into the sunset like a medieval cowboy.
Judging from this advice, it seems that Lancelot fights better than anyone else because he has found a way to bring the stress of the situation to zero. If he doesn’t care whether he lives or dies, nothing rides on his performance. He doesn’t worry about living past the end of the fight, so nothing clouds his mind and affects his abilities—he is pure concentration and skill.
Seen from this perspective, the findings presented in this chapter suggest that our tendency to behave irrationally and in ways that are undesirable might increase when the decisions are more important. In our India experiment, the participants behaved very much as standard economics would predict when the incentives were relatively low. But they did not behave as standard economics would predict when it really mattered and the incentives were highest.
COULD ALL THIS mean that sometimes we might actually behave less rationally when we try harder? If that’s so, what is the correct way to pay people without overstressing them? One simple solution is to keep bonuses low—something those bankers I met with might not appreciate. Another approach might be to pay employees on a straight salary basis. Though it would eliminate the consequences of overmotivation, it would also eradicate some of the benefits of performance-based payment. A better approach might be to keep the motivating element of performance-based payment but eliminate some of the nonproductive stress it creates. To achieve this, we could, for example, offer employees smaller and more frequent bonuses. Another approach might be to offer employees a performance-based payment that is averaged over time—say, the previous five years, rather than only the last year. This way, employees in their fifth year would know 80 percent of their bonus in advance (based on the previous four years), and the immediate effect of the present year’s performance would matter less.
Whatever approach we take to optimize performance, it should be clear that we need a better understanding of the links between compensation, motivation, stress, and performance. And we need to take our peculiarities and irrationalities into account.
P.S. I WOULD like to dedicate this chapter to my banker friends, who repeatedly “enjoy” hearing my opinion about their salaries and are nevertheless still willing to talk to me.
CHAPTER 2 The Meaning of Labor
What Legos Can Teach Us about the Joy of Work
On a recent flight from California, I was seated next to a professional-looking man in his thirties. He smiled as I settled in, and we exchanged the usual complaints about shrinking seat sizes and other discomforts. We both checked our e-mail before shutting down our iPhones. Once we were airborne, we got to chatting. The conversation went like this:
HE: