“It’s astonishing to me how some ideas endure even when it’s obvious that they are no longer relevant,” Dan Ariely writes in his latest book, Payoff: The Hidden Logic That Shapes Our Motivations. A professor of psychology and behavioral economics at Duke University, Ariely relentlessly examines our assumptions about ourselves—and finds they’re often totally misconstrued. We think, for example, that money is our main motivator in the workplace. But not only are “a sense of connection, meaning, ownership, and long-term thinking” often more effective, it also turns out that monetary bonuses can work against us, undermining our commitment to the work itself. In one study, workers at a semiconductor factory were offered rewards of a pizza voucher, a compliment, money, or nothing on the first day of a workweek. That first day, the voucher and the compliment boosted productivity more than the bonus, but all three motivated people more than the control condition (getting nothing). But as the week went on, people who’d gotten the bonus that first day began to perform worse than people who hadn’t been rewarded at all!
Please excuse the exclamation point, but it’s hard to describe an Ariely finding without one. His work often so directly counters our common understandings that it’s startling, even funny. This also has a lot to do with Ariely himself. His tenacity as a researcher is matched by his commitment to sharing his ideas with the public, in plain language and often with a dose of humor. He’s written a slew of popular books, including Predictably Irrational, The Upside of Irrationality, and The (Honest) Truth About Dishonesty, and given a number of TED Talks. (Full disclosure: I wrote about Ariely for TED last year.) We spoke by phone on a mid-October morning, and Ariely was professorial in the best way: no jargon, tons of examples, and committed to helping me understand.
Your field is behavioral economics. What is that, exactly?
There are two ways to explain it. The first one is in opposition to standard economics. In standard economics, we assume all kinds of things about people: that they know their preferences, that they always make decisions that are in their best interest, that they don’t have emotions or limitations of time and attention and thinking capacity. Based on those assumptions, economists go ahead and make recommendations on how to design our lives, how to do our tax and education and healthcare systems.
Behavioral economics just doesn’t start with any assumptions. Rather than saying, “People are perfectly rational,” behavioral economics starts by saying, “We just don’t know.” Let’s put people in different situations and see how they behave. And when you put people in different situations, people often behave very differently than most rational economists would expect. Because of that, the recommendations that come from behavioral economics are very different.
The second definition is that behavioral economics is really, for me at least, an applied field of social science that is designed to figure out how we actually make decisions and how to make things better. Now, not everybody is interested in the “better” part, but it’s an analysis of the true forces that influence us in our day-to-day lives and how we harness those forces to improve our ability to make decisions.
So what is the motivation for people who do standard economics to discount how irrational human beings are?
It’s not that they want to do it, but economics is a very beautiful framework. Imagine that somebody from the government comes and tells you, “I want to figure out how to do a healthcare system.” If you’re somebody like me, you would say, “I have some ideas, I have some experiments, let’s run them. And in five years, maybe 10 years, I’ll give you some answers or guiding principles.” But if you have somebody who comes from the perfectly rational perspective, their lives are simple. It’s much more straightforward. And no social science discipline is perfectly accurate. Sociology looks at the world from one perspective, anthropology looks at the world from another perspective, it is perfectly fine for an academic discipline to look at life from their perspective and say, “From this perspective, here are some lessons that we have learned.”
But what I think is the sin of economics is that they are not only a descriptive study, like physics, chemistry or biology, which all describe nature from very different perspectives, none of which is complete. Economists say, “We also will tell you how to live your life.” So it becomes prescriptive as well.
Right. So to get into some of your counterintuitive—if we’re thinking of ourselves as rational beings—findings: Can you start by talking about how shockingly unimportant or even disincentivizing it is to pay people money? I was particularly fascinated by your finding that as bonus size increases, performance decreases, because of the stress and fear of not getting the bonus.
Some time ago, I was asked to consult with a foreign government about a program where the ministry of finance wanted to improve the education in their schools. Their idea was to take the top 10 percent of teachers in each school and give them a bonus, and they asked me what I thought.
The first thing I asked them was, “What is your theory of what’s holding teachers now?” They said, “What do you mean?” I explained that every particular solution is an antidote to some specific problem. If you think that the solution is to give the top 10 percent of teachers a bonus, it means that you think that teachers know what to do, and the only thing keeping them from doing it is that they are lazy, and they need another motivation. Not only that, but this particular solution requires that every teacher thinks they could be in the top 10 percent. Right? Because if only the top 10 percent think they could be in the top 10 percent, it will not motivate the bottom people. So people need to be over-optimistic in this scenario. And what was clear in that example, to me, was that they had this very naive notion: “Let’s just pay people and somehow things will magically become better.”
So then I said, “How true are these assumptions that this is really what is going on?” I told them about one of my all-time favorite studies, where they gave the top teachers time to teach the not-so-good teachers. Now think about that model. That’s about knowledge, right? People don’t become teachers because they want to be lazy. They become teachers because they are motivated to help. But teaching is a very tough profession. So you want to take the people who have figured it out and give them time to teach the people who haven’t figured it out yet by themselves. Now if this ministry of finance got their way, the only thing they would guarantee is that none of the good teachers would want to help the bad teachers because then their bonuses would be at stake, right?
So all of a sudden, they would start guarding their territory. So what we really need to think very carefully about is: What is the path for change in behavior?
In this experiment you brought up, we said, “When you offer people a big bonus, what happens?” One thing that of course happens is that as the bonus becomes bigger, people crave the bonus to a higher degree. It’s a better bonus, so they want it more.
But the second question was: Can they actually work harder, is it possible? At what point are we tapped out? If I think about my own life as a university professor, if you gave me a bonus, what would I do differently? I already don’t sleep enough, I already work a lot. So far this month, I was home only yesterday. What more could I do? I would never be home.
And then the third question we asked was, people clearly would like a bigger bonus, but can they will themselves to perform better? And finally, to what extent is thinking about the bonus a good thing? Imagine that you are going into some kind of delicate brain surgery, and you could offer your brain surgeon a bonus. Would you like your brain surgeon to think constantly about the bonus?
So. We did a study in India, and during about an hour, people could make either a whole salary that they would make in a regular day, the salary they would get in a regular two weeks or a salary that they would make in five months. Between the one-day and the two weeks’ payment, there was no difference. But between two smaller payments and the five months’ payment, there was a decrease in performance. People were not able to will themselves into a higher level of performance—but the stress did have a big negative effect on their behavior.
We also asked a group of Stanford MBAs what they thought would happen in this case. They believed that the bigger the bonus, the better people would perform. So they had this intuition that the craving for money would be the only thing that was important—and they didn’t have the intuition about the effects of stress.
We repeated this experiment with some very mechanical tasks, like tapping very quickly on a keyboard. When the task is very mechanical, the stress doesn’t have a negative effect. Why? Because you can will yourself into higher performance. Like, imagine I paid you $10 per mile that you ran or a million dollars. Right? If I paid you a million dollars, you could will yourself to run more. But if I paid you a bigger bonus to become funnier or more creative, that is not something that you can actually control.
One really interesting finding of yours is what you call the “IKEA effect”: when we build something ourselves, we not only like it better, but believe other people will love it, too. Last year, I interviewed Christopher Kimball, who founded Cooks Illustrated. He sees cooking as a craft, not an art, and argues that we should master a recipe before we start playing around with it. But he points out that people increasingly want or even feel the need to make substitutions, to make recipes our own. His theory is that this has to do with how few creative outlets most of us have. What are your thoughts on this, both as someone who likes to cook and in terms of your research? What is going on here?
I absolutely agree with the insight that in modern society, it’s harder and harder for us to create something and it’s harder and harder for us to create a whole thing. But cooking is one of the places where we do much of the work. And for sure we do the last mile. So we can feel ownership. But if we just follow instructions, we can’t feel much ownership. So I think he is right that we don’t have many places in life where we feel that we can create something that is ours, and cooking is one of those.
Writing a book is another one, but it takes more time than cooking a meal. But you know, when you write a book, it’s yours in some very special way even though other people contributed. You didn’t create the paper, somebody was the graphic artist, you have an editor—but it still feels like your book. So I think it’s right that we crave that and we don’t have enough of it.
In one study, they took kids into a room with a research assistant. The research assistant either said to the kid, “Tell me what to draw and I will draw it,” or “You draw and I’ll tell you what to draw.” And then they came out of the room and the research assistant stood in front of the kid, holding the drawing, and said to the kid’s mother, “Look what I did.” So the research assistant claimed credit. Even at a very young age, kids were more upset when the idea was theirs. So if we follow instructions, we don’t feel that the thing is ours in the same way.
Since you mentioned writing a book, I wondered about this tendency of many writers to complain about how incredibly difficult it is to write. Given the relationship between our creative efforts and our sense of ownership and pride in what we’ve made, could the reason for these complaints be that it helps us feel more proud of our work?
No question about it. It would be very hard to say that you are very proud of something that took you no effort. This is very important. And also I think that there is something very special about writing: it is very unclear from the outside how much effort it really takes. So I think that a lot of times we have to tell people because we don’t want them to make the assumption that it didn’t take much effort. We have to correct them. There are professions that don’t need that help because it’s clear how difficult it is. People who run a marathon or train to be an Olympic swimmer don’t have to tell you how much they practice and how difficult it is. But when you do something like writing, it is very, very difficult to figure out how much effort actually went into it. So we kind of have to tell people because it does change how we think people view what we have done.
There is another very interesting thing about writing. I don’t think of myself as a real writer. It’s very, very different to write general science than to write novels. But I must write, I don’t know, 30 to 50 drafts of each book. It’s very hard to get to draft 50 and not ask myself, “Why didn’t I just write this draft from the beginning?” [Laughter] Right? “Why did I waste draft one through 49?”
And the answer, of course, is no, I couldn’t have. It’s a process and you make mistakes and you learn and you figure things out. You can’t just write version 50 before writing the other ones. But that’s not how we see things. So it also feels, in writing especially I think, that there is a tremendous amount of wasted effort.
So much of your research is about motivation in the context of working with other people, in an organization. Can you talk a little bit about self-motivation? How we can get ourselves to persist with a really long-term, difficult project when there are few ways to get affirmation from others as we’re going along?
I think that the first thing to recognize is how difficult it is to be motivated about things that will happen in the long term. It’s almost inhumane. And this includes all kinds of things that we need to motivate ourselves to do. There are very few projects that we’ll finish in a month. Everything that we do for our health is about the long-term. But the long-term is just not that motivating because we just do effort, effort, effort, effort—and nothing good comes from it. So what can we do? We can hope, which is what physicians often do—they tell patients, “Oh, you just need to take this medication because otherwise you’ll die from something.” And we can hope that that will be sufficient. The problem is, it’s just not.
We have three solutions for this. The first solution is: We’ll just pick a rule and you will not think about it, you will not ponder it, you will just obey the rule and that’s it. This helps in some cases. Think about if you are religious: lots of things are dictated for you. If you are Hindu, you don’t eat meat. You don’t have to wonder about this. But if you’re a vegetarian, you could say to yourself, “Let me be vegetarian 85 percent of the time.” What would happen if that’s the rule that you set for yourself? You would fail. You would not fail all the time, but you would fail often, because it’s hard to keep a rule that is about 85 percent of the time. So people basically become vegetarians all the time and it’s an easier thing to stick to, to say I never eat meat. It’s all about all or none. I always do this, I never do that.
The second solution is what we call reward substitution. We say that the real objective that we have is just too far off and is not sufficiently motivating. So instead, we find another goal that is not about the long-term goal, it’s about something that is shorter, but it will get us to behave as if we care about the long term. A lot of what we call gamification falls into this category. Gamification is basically saying, “Let me give you points for behaving well, and by pursuing points, you will behave as if you care about your health”—or whatever it is.
From your research, it seems like if the reward was money, it would not work this way. It has to be something other than money.
That’s right. Part of the reason is that with money, you never really get it now. Money is a medium to get other things, and it’s sometimes less powerful than these other things. If I stand in the street and ask people, “Would you fill out a survey for five minutes if I give you three dollars?” most people say no. If I stand on the same street and say, “Would you fill out a survey for five minutes if I buy you a cappuccino?” people are very happy to do it. Now with three dollars, you can buy a cappuccino. But when you get three dollars you don’t think about the hedonic value of what you’re getting. Plus it’s not part of the social exchange, so it ends up being very different, even if in the absolute value of the financial transaction, the three dollars is worth more than the cappuccino.
Right. So—I interrupted you. What’s the third solution for long-term motivation?
The third one is what you call a Ulysses contract: We constrain our behavior now to force ourselves to do something in the future. For example, have you ever made an appointment with a trainer in the gym and paid in advance, and if you didn’t show up, you couldn’t get the money back?
Now why is that a good approach? Because we can’t get the money back. If you could get your money back, I think that whole industry would collapse. Nobody would ever show up. So a Ulysses contract is when you say, “I know that my future self is going to misbehave, so let me do something now to prevent that.” So you can go out drinking, but only take twenty dollars in cash. It’s called a Ulysses contract because if you remember Ulysses, he asks the sailors to tie him to the mast so he can’t follow the Sirens.
You write that as soon as the monetary system is introduced, it completely undermines the social contract. Does that have anything to do with culture, or is it intrinsic to money, no matter what?
In some cultures, it is very common to give people money as a gift. I don’t know of any culture that you come to people’s home and give them cash when they invite you for dinner, but in some places, it is more common to give money for birthdays, wedding gifts, and so on. When something becomes common and socially accepted, it does become less offensive. So if we created a society in which when you came to my house for dinner, it was expected that you would bring $25 rather than a bottle of wine, it would be less offensive. But even in cultures where this is accepted, I don’t think that the money is increasing the fabric of friendship compared to other things that people could do. So even if money is not offensive, it is still not as positive as other things could be.
According to your research, we tend to overvalue how effective an incentive money will be in the workplace, and undervalue the importance of meaning and interpersonal connection. I haven’t worked in a corporate environment for a long time, but from the outside, it seems to me that there are a lot of restrictions on what’s considered professionally appropriate. You suggest as possible incentives such lovely human interactions as giving a hug, or delivering pizza to your employees—but I wondered if they might be frowned upon. Does that ring true at all, and how much are our cultural norms and fears playing into our misunderstanding of motivation in the workplace?
When we design incentive systems, we are not in the system itself. We are looking from the outside in. We say, “What motivates people? Money. Let me rearrange the money in some way that would get people to want this and want that and so on.” But we don’t truly understand at that moment the depth and range of motivation. I think that’s the first part, that when we design systems, we don’t understand the incentives.
And the second thing is that you’re right, we have created a culture that makes it hard, sometimes, to create social reciprocity. Like you said, there’s a cool detachment. I asked one bank, “What do you do with people when they get a bonus of more than a million dollars?” And they said, “Nothing. We don’t even shake their hands.” I was quite outraged. It’s a public company and they are wasting our money! I would much prefer if they paid people eight hundred thousand and invited them for a beer. But they’re so happy to give our money away that they don’t even think about what else they can do, and they’ve created a culture in which they don’t even say, “Congratulations, and thank you very much, I really appreciate your help.”
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This interview has been edited and condensed for length and clarity.
Jessica Gross is a writer based in New York City.