Book Review -

Payoff: The Hidden Logic That Shapes Our Motivations by Dan Ariely

Life is never made unbearable by circumstances, but only by lack of meaning and purpose.
—Viktor E. Frankl

In his continuing pursuit of the practical applications of behavioral finance and the psychology of decision-making, Dan Ariely has released a book about factors that influence human motivation. These insights are helpful not only in developing more effective motivation for our own actions, but also for those in leadership positions whose responsibilities include more effective strategies for catalyzing team performance.

In his usual personalized and comfortable story-telling style, Ariely provides examples of situations in which a leader has made assumptions about actions intended to motivate team performance that turn out to be ineffective or reduce the desire of team members to accomplish their objectives. He cites and explains research about the important factors that influence fundamental motivation. More importantly, he provides practical tips for shaping motivation in ourselves and others.

The book is an easy read. It contains only four chapters (plus an introduction and epilogue). Ariely begins with examples of how motivation can sometimes be inadvertently destroyed. He writes that “when we are acknowledged for our work, we are willing to work harder for less pay, and when we are not acknowledged, we lose much of our motivation.” He cites a study illustrating that we significantly undervalue how much a feeling of accomplishment influences people.

To overcome this challenge in ourselves, we can change our mental framing. When we’re feeling unmotivated, Ariely suggests we ask ourselves the following questions:

1 - How is the work I’m doing helping someone down the road?

2 - What meaning can I find in my current role?

3 - Could I be more observant about how my actions are perceived by and impact the people around me?

Ariely provides some interesting observation about the difference between happiness and meaning relative to motivation. He quotes a paper titled “Some Key Differences between a Happy Life and a Meaningful Life”:“ People who report having meaningful lives are often more interested in doing things for others, while those who focus mostly on doing things for themselves report being only superficially happy.”

Ariely also tells us about “the IKEA effect,” the term he and his colleagues use to describe the general overfondness people have for things they have put together themselves. His point is that, to the degree you can involve people in building something, they will see it as more valuable. He writes that we are “strongly motivated by identity, the need for recognition, a sense of accomplishment, and feeling of creation.”

The author also addresses the most-presumed motivator (i.e., money) and the question of which kinds of external rewards are best at positively motivating people. Ariely considers research that presented four different reward conditions for study participants at the start of their workweek:

• A cash bonus if they reach that day’s production goal

• A pizza voucher if they reach that day’s production goal

• A compliment—a “Well done!” via text message from the boss—if they reach that day’s production goal

• No response (i.e., the control condition)

The study reported that the pizza voucher and the text message were most effective at boosting productivity by 6.7 percent and 6.6 percent, respectively, compared to the cash reward at 4.9 percent. Indeed, when the study included additional days of the workweek, the cash-bonus participant’s performance on the second day was 13.2 percent worse than the control condition. Over an entire workweek, the cash- bonus participants had a 6.5-percent drop in performance relative to the control group.

Ariely cites another study that found “when we are in the midst of a task, we focus on the inherent joy of the task, but when we think about the same task in advance, we overfocus on the extrinsic motivators, such as payment and bonuses.” In other words, we are not good predictors of the factors that enhance and reduce our motivations, and we specifically underestimate the intrinsic joy of the work we do.

The author makes us aware of categorical dimensions of our jobs: when the output is “countable” (how many widgets produced per hour) or “uncountable” (creativity in improving processes, enhancing trust in relationships with co-workers). In designing reward systems, organizations are likely to overvalue the countable aspects and undervalue the uncountable aspects such as basic trust and goodwill.

Finally, Ariely addresses dynasty as a motivational factor. He writes, “[A]sk yourself how would you feel if everything you did throughout your lifetime was erased from the face of the earth the moment you died.” He acknowledges that he is just beginning his own research in this area but tells us he suspects that “many of our motivations are based on a horizon longer than our lifetimes.” Indeed, thinking about writing one’s own obituary might help in examining one’s own dynastical motivations. As someone who works to motivate ethical behavior among investment professionals, I recommend Ariely’s specific suggestions because I believe they link our perspective, decisions, and actions to the greater good, dynastical or not.

Payoff: The Hidden Logic That Shapes Our Motivations
By Dan Ariely,
128 pages, hardback
ISBN-10: 1501120042
ISBN-13: 978-1501120046
US$16.99; TED Books, Simon & Schuster, Inc., 2016