Motivation and the Economy

Dan Pink on the surprising science of motivation. A very interesting TED talk. For those of you who don't know, TED stands for Technology, Entertainment, and Design. It's a conference where people who know a lot of stuff make engaging presentations to each other about everything under the sun. There are a lot of videos on youtube and elsewhere floating around of various talks, and almost all of them are extremely interesting.

This one was especially interesting to me in that it provides some challenge to one of the basic assumptions behind my political belief in fiscal conservatism, and free market economics (well, not completely free, of course). That challenge is the assertion that rewarding someone with money works if they have simple labor to do, but when their job becomes much more creative, simple external incentives may not be as effective.

On second thought, however, I'm not too worried that this will shake the foundation of my beliefs to it's core. Basically, this is a direct challenge to the half of the market that is about profit. In other words, the idea that money is the best motivation to get people to work hard. It is very interesting to hear strong evidence opposing that belief. I will have to think on it some more, and will probably come up with some other connections, extrapolations, and ramifications it may have, but that's a discussion for another time.

The other part of the market is about loss. Profit and loss, and people often forget about the loss part. Milton Friedman put it rather effectively some decades ago: "If Chrysler loses money, they have to change what they're doing; if Amtrak loses money, they just go get a bigger government appropriation." It's a simplistic example, but those are often the best at getting the idea across.

This TED talk does nothing to contradict the effectiveness of loss on efficiency in the economy. And I would also add that running an experiment where you threaten people with taking away some of their money if they don't solve the candlestick problem would not contradict the effectiveness of it either. Because loss is less a motivation, and more of a... how would I put it? A barometer? If you are losing money, that means your solution isn't working. It might mean you're not working hard enough, but it might also simply mean that the way you're working isn't good enough.

The candlestick test is insufficient to prove that "loss" is an ineffective tool of the economy to improve overall efficiency of society. This is because the test is too simple. Money and price is the economy's way of on voting whether a particular product is wanted or not. If you don't get moeny for it, then no one wants it, and you know you need to do something different. If your business is losing money, that means that the economy does not value your work enough to justify you continuing to do it.

This isn't to say that what you're doing is bad or good, it simply means that want you're doing is insufficient. The closest the candlestick problem gets to representing that state would be the case of using the thumbtacks to attach the candle to the wall, or trying to glue it to the wall with it's own wax. Both methods do not work. Not earning enough money is the market's way of letting you know that your method did not work. And in that respect, it is not motivating, but it is useful.