Farnam Street helps you make better decisions, innovate, and avoid stupidity.
With over 400,000 monthly readers and more than 93,000 subscribers to our popular weekly digest, we've become an online intellectual hub.
Farnam Street helps you make better decisions, innovate, and avoid stupidity.
With over 400,000 monthly readers and more than 93,000 subscribers to our popular weekly digest, we've become an online intellectual hub.
Why do you go to work? Chances are it’s got something to do with money. But as most of us know, it’s more complicated than that. “There is a spectrum of reasons why people do their jobs,” write Neel Doshi and Lindsay McGregor in Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation. “Understanding that spectrum is the key to creating the highest levels of performance.”
The authors argue there are six reasons we do anything. The first three they call indirect motivations and the latter three are direct motivations.
You’re most likely to lose weight—or succeed in any other endeavor— when your motive is play. Play occurs when you’re engaging in an activity simply because you enjoy doing it. The work itself is its own reward. Scientists describe this motive as “intrinsic.”
Play is what compels you to take up hobbies, from solving crossword puzzles to making scrapbooks to mixing music. You may find play in weight loss by experimenting with healthy recipes or seeking out new restaurants that offer healthy options. Many of us are lucky enough to find play in the workplace too, when we do what we do simply because we enjoy doing it.
Curiosity and experimentation are at the heart of play. People intrinsically enjoy learning and adapting. We instinctively seek out opportunities to play.
Play at work should not be confused with your people playing Ping Pong or foosball in the break room. For your people to feel play at work, the motive must be fueled by the work itself, not the distraction. Because the play motive is created by the work itself, play is the most direct and most powerful driver of high performance.
A step away from the work itself is the purpose motive. The purpose motive occurs when you do an activity because you value the outcome of the activity (versus the activity itself). You may or may not enjoy the work you do, but you value its impact. You may work as a nurse, for example, because you want to heal patients. You spend your career studying culture because you believe in the impact your work can have on others. Dieters may not enjoy preparing or eating healthy meals, but they deeply value their own health, an outcome of healthy eating.
You feel the purpose motive in the workplace when your values and beliefs align with the impact of the work. Apple creates products that inspire and empower its customers, a purpose that is compelling and credible. …
The purpose motive is one step removed from the work, because the motive isn’t the work itself but its outcome. While the purpose motive is a powerful driver of performance, the fact that it’s a step removed from the work typically makes it a less powerful motive than play.
The potential motive occurs when you find a second order outcome (versus a direct outcome) of the work that aligns with your values or beliefs. You do the work because it will eventually lead to something you believe is important, such as your personal goals.
Dieters motivated by potential eat healthfully to achieve other things they care about—the ability to run faster on the football field, for example, or to keep up with their kids. When a company describes a job as a good “stepping-stone,” they’re attempting to instill the potential motive.
These are the direct motives. Direct because they generally connect to the work itself.
As a result, they typically result in the highest levels of performance. If you remember only one thing from Primed to Perform, it should be that a culture that inspires people to do their jobs for play, purpose, and potential creates the highest and most sustainable performance.
Not all motives correlate with higher performance. Motives that don’t connect to the work itself typically reduce performance.
The first indirect motive, emotional pressure, occurs when emotions such as disappointment, guilt, or shame compel you to perform an activity. These emotions are related to your beliefs (your self- perception) and external forces (the judgments of other people). The work itself is no longer the reason you’re working.
You may practice the piano so you don’t disappoint your mother. You may stay in a job because its prestige boosts your self-esteem. A dieter may eat healthy meals because he’s embarrassed by how he looks, or because he feels guilty when his partner catches him with his hand in the cookie jar.
In each case, the motive is not directly connected to the work. It is indirect.
When your motive to work is emotional pressure, your performance tends to suffer. … High-performing cultures reduce emotional pressure. … [E]motional pressure is the weakest of the three indirect motives. The effects of economic pressure can be much worse.
Economic pressure is when you do an activity solely to win a reward or avoid punishment. The motive is separate from the work itself and separate from your own identity (see Figure 3 for an illustration of this separation). In business, this often occurs when you’re trying to gain a bonus or a promotion, avoid being fired, or escape the bullying of an angry boss. Economic pressure can occur outside the workplace, whenever you feel forced to do something.
The biggest misconception about the economic motive is that it is strictly a matter of money. In a study we conducted involving more than ten thousand workers, we looked to see how the economic motive changes with household income. We expected to find that the people with the least income experienced the highest economic pressure. Instead, we learned that income and the economic motive were statistically unrelated. People at any income level can feel economic pressure at work.
This is an important insight. Money alone does not cause the economic motive.
There are situations where money works, and situations where it doesn’t. It all depends on whether or not the reward or punishment is the motive behind the activity, and whether the activity would benefit from adaptive performance.
The most indirect motive of all is inertia. With inertia, your motive for working is so distant from the work itself that you can no longer say where it comes from—you do what you do simply because you did it yesterday. This leads to the worst performance of all. … As destructive and insidious as it is, inertia is surprisingly common in the workplace.
I’ll have more to say on culture but needless to say, this is only one lens.
In Think Twice: Harnessing the Power of Counterintuition, Michael Mauboussin, the first guest on my podcast, The Knowledge Project, explains the expert squeeze and its implications for how we make decisions.
As networks harness the wisdom of crowds and computing power grows, the ability of experts to add value in their predictions is steadily declining. I call this the expert squeeze, and evidence for it is mounting. Despite this trend, we still pine for experts— individuals with special skill or know-how— believing that many forms of knowledge are technical and specialized. We openly defer to people in white lab coats or pinstripe suits, believing they hold the answers, and we harbor misgivings about computergenerated outcomes or the collective opinion of a bunch of tyros.
The expert squeeze means that people stuck in old habits of thinking are failing to use new means to gain insight into the problems they face. Knowing when to look beyond experts requires a totally fresh point of view, and one that does not come naturally. To be sure, the future for experts is not all bleak. Experts retain an advantage in some crucial areas. The challenge is to know when and how to use them.
So how can we manage this in our role as decision maker? The first step is to classify the problem.
(The figure above — The Value of Experts) helps to guide this process. The second column from the left covers problems that have rules-based solutions with limited possible outcomes. Here, someone can investigate the problem based on past patterns and write down rules to guide decisions. Experts do well with these tasks, but once the principles are clear and well defined, computers are cheaper and more reliable. Think of tasks such as credit scoring or simple forms of medical diagnosis. Experts agree about how to approach these problems because the solutions are transparent and for the most part tried and true.
Now let’s go to the opposite extreme, the column on the far right that deals with probabilistic fields with a wide range of outcomes. Here are no simple rules. You can only express possible outcomes in probabilities, and the range of outcomes is wide. Examples include economic and political forecasts. The evidence shows that collectives outperform experts in solving these problems.
The middle two columns are the remaining province for experts. Experts do well with rules-based problems with a wide range of outcomes because they are better than computers at eliminating bad choices and making creative connections between bits of information.
Once you’ve classified the problem, you can turn to the best method for solving it.
… computers and collectives remain underutilized guides for decision making across a host of realms including medicine, business, and sports. That said, experts remain vital in three capacities. First, experts must create the very systems that replace them. … Of course, the experts must stay on top of these systems, improving the market or equation as need be.
Next, we need experts for strategy. I mean strategy broadly, including not only day-to-day tactics but also the ability to troubleshoot by recognizing interconnections as well as the creative process of innovation, which involves combining ideas in novel ways. Decisions about how best to challenge a competitor, which rules to enforce, or how to recombine existing building blocks to create novel products or experiences are jobs for experts.
Finally, we need people to deal with people. A lot of decision making involves psychology as much as it does statistics. A leader must understand others, make good decisions, and encourage others to buy in to the decision.
So what are the practical tips you can do to make the expert squeeze work for you instead of against you? Here Mauboussin offers 3 tips.
1. Match the problem you face with the most appropriate solution.
What we know is that experts do a poor job in many settings, suggesting that you should try to supplement expert views with other approaches.
2. Seek diversity.
(Philip) Tetlock’s work shows that while expert predictions are poor overall, some are better than others. What distinguishes predictive ability is not who the experts are or what they believe, but rather how they think. Borrowing from Archilochus— through Isaiah Berlin— Tetlock sorted experts into hedgehogs and foxes. Hedgehogs know one big thing and try to explain everything through that lens. Foxes tend to know a little about a lot of things and are not married to a single explanation for complex problems. Tetlock finds that foxes are better predictors than hedgehogs. Foxes arrive at their decisions by stitching “together diverse sources of information,” lending credence to the importance of diversity. Naturally, hedgehogs are periodically right— and often spectacularly so— but do not predict as well as foxes over time. For many important decisions, diversity is the key at both the individual and collective levels.
3. Use technology when possible. Leverage technology to side-step the squeeze when possible.
Flooded with candidates and aware of the futility of most interviews, Google decided to create algorithms to identify attractive potential employees. First, the company asked seasoned employees to fill out a three-hundred-question survey, capturing details about their tenure, their behavior, and their personality. The company then compared the survey results to measures of employee performance, seeking connections. Among other findings, Google executives recognized that academic accomplishments did not always correlate with on-the-job performance. This novel approach enabled Google to sidestep problems with ineffective interviews and to start addressing the discrepancy.
Learning the difference between when experts help or hurt can go a long way toward avoiding stupidity. This starts with identifying the type of problem you’re facing and then considering the various approaches to solve the problem with pros and cons.
Still curious? Follow up by reading Generalists vs. Specialists, Think Twice: Harnessing the Power of Counterintuition, and reviewing the work of Philip Tetlock on why how you think matters more than what you think.
“The art of leadership is saying no, not yes. It’s very easy to say yes.” — Tony Blair
One of the clearest signs of poor leadership is the inability to focus — it’s easy to say yes and it’s very hard to say no.
Seymour Schulich elaborates on this in Get Smarter: Life and Business Lessons:
This piece of wisdom was instilled in me many years ago by Joe Rotman, an entrepreneur who is the benefactor of the Rotman School of Business at the University of Toronto. Many years ago, prior to the philanthropic work that made him famous, I arranged for a meeting so that I could gather the insight of an astute businessman who’d built a fortune in the resource business, primarily through oil and gas production.
“Every successful businessperson has to learn how to say no,” he told me that day. If you spend your life in business, you will see dozens or perhaps hundreds of potential deals. A small number will be highly attractive; most will be average or below average. The path to superior results is to accept only the best ideas — indeed, no venture capitalist or merchant banker could survive for very long without saying no to 90 per cent (or more) of the pitches he sees.
You can be diplomatic, firm, or a combination of the two, but you must be comfortable with the idea of handing out rejection. Rotman’s lesson became rooted deeply in my consciousness and caused me to be much less wimpy about turning down venture capital deals, start-up companies, and charities.
It’s not so much what you do but rather what you don’t do that matters.
Follow your curiosity to eight ways to say no with grace and style.
In this excerpt from Who Says Elephants Can’t Dance?, Louis V. Gerstner Jr. says something I wish tech companies would heed.
I said something at the press conference that turned out to be the most quotable statement I ever made:
“What I’d like to do now is put these announcements in some sort of perspective for you. There’s been a lot of speculation as to when I’m going to deliver a vision of IBM, and what I’d like to say to all of you is that the last thing IBM needs right now is a vision.” You could almost hear the reporters blink.
I went on: “What IBM needs right now is a series of very tough-minded, market-driven, highly effective strategies for each of its businesses— strategies that deliver performance in the marketplace and shareholder value. And that’s what we’re working on.
“Now, the number-one priority is to restore the company to profitability. I mean, if you’re going to have a vision for a company, the first frame of that vision better be that you’re making money and that the company has got its economics correct.
“And so we are committed to make this company profitable, and that’s what today’s actions are about.
“The second priority for the company,” I said, “is to win the battle in the customers’ premises. And we’re going to do a lot of things in that regard, and again, they’re not visions— they’re people making things happen to serve customers.”
I said we didn’t need a vision right now because I had discovered in my first ninety days on the job that IBM had file drawers full of vision statements. We had never missed predicting correctly a major technological trend in the industry. In fact, we were still inventing most of the technology that created those changes.
However, what was also clear was that IBM was paralyzed, unable to act on any predictions, and there were no easy solutions to its problems. The IBM organization, so full of brilliant, insightful people, would have loved to receive a bold recipe for success—the more sophisticated, the more complicated the recipe, the better everyone would have liked it.
It wasn’t going to work that way. The real issue was going out and making things happen every day in the marketplace.
Fixing IBM was all about execution. We had to stop looking for people to blame, stop tweaking the internal structure and systems. I wanted no excuses. I wanted no long-term projects that people could wait for that would somehow produce a magic turnaround. I wanted— IBM needed— an enormous sense of urgency.
Seymour Schulich, one of Canada’s most successful businessmen and author of Get Smarter: Life and Business Lessons offers some indispensable business wisdom.
- Business is a means to an end not an end in itself. Nobody on his or her deathbed says, “I wish I had spent more time in the office.”
- Never quit a job unless you have another job. My father taught me this great truth. You are perceived as more valuable if you are working than if you’re unemployed. You may feel staying employed doesn’t give you the time or latitude to seek a better job. This is a dangerous delusion—don’t succumb to it.
- Always ask the question “If this decision is wrong, is it going to be painful or fatal?” Company builders and business leaders keep away from “bet the company” investments.
- Keep away from advisors/consultants. If they knew how to make money, they would. These folks are like the fellow who knows a thousand ways to make love but doesn’t know any women.
- The best test of a deal’s true attraction is to ask your partners, employees, directors, family, and so on, “Would you put your own money in this deal?” It’s amazing how often the answer to this question is, “No! This is good for the company, but I’ll take a pass.” These deals are invariably losers.
- Always have at least two people from your side present at any negotiating or deal-making sessions. This gives you time to think, plus an ally with whom to compare perceptions.
- Never confront or threaten people or institutions who have more power than you. Examples: police, customs agents, the sec, Ontario Securities Commission, tax agents of the government, or politicians.
- In dealing with the media, never forget to qualify your statements with “not for attribution” and “off the record” where appropriate. Journalists value their contacts and will usually respect a source’s desires.
- In negotiations, always try to get the other party to name its asking price. It may often be far lower than your maximum offer. If the other party won’t name a price, start very low. You can always go up.
- Almost everything in life is easier to get into than get out of.
- Never bid against yourself. Only raise your bid to top a real counter bid, not an imaginary one.
In an interview with Jeff Cunningham, Warren Buffett hits on two principles that elude most of us.
Interviewer: I was reading a Lincoln quote the other day, “With public sentiment, nothing can fail. Without it, nothing can succeed.” Of course, he was talking about what led to the Emancipation Proclamation. When I think about your world, 330,000 people who are employees of Berkshire Hathaway or its subsidiaries, how do you send the message that they are being scrutinized under the microscope by the media at all times?
Buffett: I send a message to their managers. Those 330,000 people work for maybe 70 or so CEOs and in turn work for me. My job is to have those 70 CEOs sending out the right message. Every two years, I write them a very simple letter. It’s a page-and-a-half. I don’t believe in 200-page manuals because if you put out a 200-page manual, everybody’s looking for loopholes basically.
Page-and-a-half, it’s very hard for them to argue about what I’m talking about. I tell them that my reputation, Berkshire’s reputation, is in their hands. We’ve got all the money we need. We’d like to make more money but we’ve got all the money we need. We don’t have an ounce of reputation beyond what we need. We can’t afford to lose it. We never will trade reputation away for money.
They’re the ones that are the guardians of that. I want them to not only do what’s legal obviously, but I want them to judge every action by how it would appear on the front page of their local paper written by a smart but semi-unfriendly reporter who really understood it to be read by their family, their neighbors, their friends.
It has to pass that test as well. I tell them I don’t want anything around the lines. I tell them there’s plenty of money to be made in the center of the court. I’m 84. My eyes aren’t that good anymore. I can’t quite see the lines that well. Just keep it in the center of the court. If they have any questions, call me.
As for advice on what to do when you face a problem …
Interviewer: Even the occasional dust-up at Berkshire is big news. I’ll pick on Salomon only because it’s history now. It’s got a lot of time to reflect on that. When you think about what you went through there, what advice do you have for a CEO who’s on the media hot seat because of a similar situation?
Buffett: There are a couple pieces of advice on that. The first is that when you find out a bad news, correct that and if it’s necessary to report it, then the authorities report it to the media. The big problem with Salomon was not what a fellow named Mozer did which was to defy the US government, not ever a very good idea. But that could have been handled, but he reported…He didn’t report it.
John Meriwether, his supervisor, picked up on it in late April of 1991 and went to the president, the chairman and the chief legal counsel of Salomon and said, “Here’s what this fellow Mozer has been doing.” They all agreed it was wrong. They all agreed it was reportable to the Federal Reserve promptly. Unfortunately, nobody did anything.
In the middle of May, Mozer went out and did it again. Now, you’ve got a terrible problem because you knew the guy was a bad actor a few weeks earlier and he hadn’t reported it and that compounded there. Then, you’re in a real pickle.
When you find bad news, I say get it right, get it fast, get it out, get it over. Get it right is important. When they questioned, Mozer had done it there. But the get it fast and get it out, they missed on.
You’re going to get bad news. I got 330,000 people. I will guarantee you that probably dozens of them are doing something wrong right now. I just hope I find out about it early and the person below me finds out and lets me know if it’s bad enough and that they stop it.
You can’t have a city of 330,000 without an occasional [laughs] crime of some sort. It’s going to happen. You’ve got to do something about it fast when it does happen.