Watch the video first, and then I have some points to make... Done? All right then.
Dan Pink makes some fantastic points throughout this speech, yet as surprised as he believes I should be and assumes that everyone else in the room is to learn this shocking "new" information, I am completely and uniformly... not.
Why not, you ask?
Am I some kind of super-genius who knows more than sociological researchers or Nobel laureate economists from the London School or the University of Chicago? Probably not.
However, I would suggest that it is possible that I have an understanding of incentives (motivations) & economics that Dan Pink at least, and possibly those other folks, simply have not taken into consideration. For those who didn't actually watch the video like you were supposed to, Mr. Pink explains that for certain types of jobs - specifically creative or "right brained" jobs which require intelligent, cognitive problem solving as opposed to more mechanically repetitive jobs - the "standard" incentives of higher wages or disincentives of being fired don't actually work.
And he's not just saying that they don't work well... He's saying that they actually work almost completely the opposite of their intended purpose to the extent that they are tried. In consistent social experiments, Dan notes that sociological researchers are finding that in creative problem-solving situations, offering people more money to do a job faster actually correlated to poorer performance than people who are offered lower rates of pay.
Seems odd, right? Dan certainly thinks so.
But I don't. At all. You see, it seems odd only if your conception of incentives is purely financial or monetary.
Clearly, that's what Dan is referencing and is the one major flaw he seems to repeat throughout this speech. It's also a stereotype of economists and so-called "free market" supporters that is actually completely untenable, and is why I've decided to write about this today.
The premise of his talk is that "science knows" that people don't actually respond to incentives in the way economists and (many, but definitely not all) businesses believe... While he's certainly right that the business environment is changing for Americans in the 21st Century into areas which "traditional" financial incentives have less meaning for employees, he actually makes no challenge what-so-ever to the assertion that people respond to incentives, which is sort of the revelation he's trying to support. What's more, essentially his entire speech at TED actually supports the basic Misesian "Action Axiom" instead, summed up as follows:
"Action is the purposeful employment of means to achieve ends in accord with the actor's values."Note the crucial qualifier: "in accord with the actor's values."
...Not the proscribed values of researchers, not the values of other people... The values of those individuals doing the action and no one else.
Where Mr. Pink gets confused is that his conception of what constitutes an "incentive" has been grossly narrowed to include only the kinds of ideas bandied about by the same types of economists who are hung up on aggregating supply, demand and every other market process in order to quantify & create fancy, elegant and entirely useless macroeconomic statistical models. What's worse, is that he pushes this false assumption onto both the audience (who for all I know share his misconception) and to essentially all economists.
For example:
Dan discusses the success of Wikipedia over Microsoft Encarta in the mid-1990s, noting that Microsoft did everything "right" according to what people thought about incentives at that time. They hired writers, management, paid everyone well and yet Encarta is used by almost no one, and Wiki is obviously the go-to source for just about everyone today. Dan says that;
"Ten years ago you could not have found a single, sober, economist anywhere on planet Earth who would have predicted the Wikipedia model."But he's wrong about that. Extremely wrong, in fact. He's failed to take the Austrian School into account on this point, and the entire speech is unwittingly an ode to Ludwig von Mises' beautiful treatise, "Human Action" (PDF) first published in 1949... Undercutting the above statement severely.
I suppose in all fairness, many economists don't exactly view the Austrian crowd as "sober", but that's a discussion for another day, and I doubt Mr. Pink would quibble over that point anyway...
On the issue of human motivation, however, anyone who's remotely familiar with the Austrian School of Economics (which has been around over 100 years and has successfully predicted and clearly explained many major economic events, such as the Great Depression, the steep rise in inflation since the 70s, various shortages and bubbles & even the current economic catastrophe) should be explicitly aware that the school's views are completely in line with "the science" being reported on at TED, and always have been.
I would go so far as to suggest that had Mr. Pink approached any economist from Walter Block, Bob Murphy or Mark Thornton all the way to even a few non-Austrians like George Mason University's Walter Williams or the brilliant Monetarist, Thomas Sowell, and said, "Would you believe that an encyclopedia who's only rewards for contribution were the satisfaction of writing about a topic you are interested in could out-compete a professional highly paid encyclopedia like Encarta?" and I can almost guarantee that every single one of them would have resoundingly said, "Of course!"
This is because, for any economist who actually understands the nature of subjective value (which is the whole deal with the Austrian School), the question is already answered within the premise. Do the people contributing value the reward they're being offered - in this case, international publication in subject areas they are acutely passionate about? YES... Immensely! Is the reward monetary? Not at all.
What's even more amusing (to me) in the Wikipedia example is that the founder of Wikipedia, Jimmy Wales, is a pretty hard core Objectivist-leaning libertarian! Funny how it's always the libertarian crowd who winds up correctly anticipating the way real humans are actually going to behave in the real world. It's endlessly perplexing to me how "we" wind up getting told repeatedly that we're crazy, only to be completely vindicated in our views a little while later... Of course, after being vindicated, we just go on to being called "nuts" about something else. Good times.
But I digress...
The lesson to learn here is one I've written about repeatedly on this blog. The goal of economic activity isn't to arbitrarily move around some quantity of dollar bills from one party to another... It is instead to tangibly improve the lives of all parties involved in the exchange - based solely on the judgment of those individuals involved.
And that... is the fundamental point here.
Understanding that human beings act to pursue things that they value, and that values are subjective and dependent entirely on the individual in question means that monetary incentives are most definitely not the only types of incentives people are going to respond to. It should also come as no surprise that people with higher levels of intelligence, skills and the ability to creatively solve intellectual and artistic problems for a living are motivated far less by monetary concerns (which we can usually assume they've largely already secured) and far more by the pursuit of besting challenges and rewarding experiences.
As Dan Pink puts it, people are looking for "Autonomy, Mastery & Purpose ".
That they are, Dan... That they are...
Additionally, the last few decades of American culture has shifted employment towards precisely these kinds of incentives. Granted, it's not all that widespread yet, but the internet is making it possible for people to work from home, and many companies are doing exactly that with their employees. In fact, as noted a few weeks ago, Tim Ferriss wrote a book advocating such things.
At any rate, I think that the vast majority of what Dan Pink says in that video is awesome. It falls right in line with what I've observed about human nature since I was a kid, and it doesn't surprise me to find that experiments are backing up that observation consistently. But unlike the so-called "Behavioral Economics" crowd (who on this issue are a lot like 15 year olds hearing Led Zepplin for the first time), I am under no delusions that I'm the first person in the world ever to figure this out.
Daniel Pink could do with a serious reading of Human Action. Had he gone into this talk with an understanding of the Austrian School position, and certainly with more knowledge of Ludwig von Mises' work, he might not have made the foolish claims about economists that he did, and more importantly, he might have better understood that not only are people not behaving unpredictably or surprisingly... They are, in fact, behaving perfectly in line with what any decent observers of human action would expect.
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