00:00:13
I need to make a confession
at the outset here.
00:00:15
A little over 20 years ago,
I did something that I regret,
00:00:21
something that I'm not
particularly proud of.
00:00:25
Something that, in many ways,
I wish no one would ever know,
00:00:28
but here I feel kind of obliged to reveal.
00:00:31
(Laughter)
00:00:34
In the late 1980s,
00:00:36
in a moment of youthful indiscretion,
00:00:39
I went to law school.
00:00:40
(Laughter)
00:00:45
In America, law is a professional degree:
00:00:48
after your university degree,
you go on to law school.
00:00:50
When I got to law school,
00:00:53
I didn't do very well.
00:00:55
To put it mildly, I didn't do very well.
00:00:57
I, in fact, graduated in the part
of my law school class
00:01:00
that made the top 90% possible.
00:01:04
(Laughter)
00:01:08
Thank you.
00:01:10
I never practiced law a day in my life;
00:01:14
I pretty much wasn't allowed to.
00:01:16
(Laughter)
00:01:19
But today, against my better judgment,
00:01:22
against the advice of my own wife,
00:01:25
I want to try to dust off
some of those legal skills --
00:01:29
what's left of those legal skills.
00:01:31
I don't want to tell you a story.
00:01:34
I want to make a case.
00:01:36
I want to make a hard-headed,
00:01:38
evidence-based,
00:01:40
dare I say lawyerly case,
00:01:43
for rethinking how we run our businesses.
00:01:47
So, ladies and gentlemen of the jury,
00:01:49
take a look at this.
00:01:51
This is called the candle problem.
00:01:53
Some of you might know it.
00:01:55
It's created in 1945
00:01:57
by a psychologist named Karl Duncker.
00:01:59
He created this experiment
00:02:01
that is used in many other experiments
in behavioral science.
00:02:04
And here's how it works.
Suppose I'm the experimenter.
00:02:07
I bring you into a room.
00:02:08
I give you a candle,
some thumbtacks and some matches.
00:02:13
And I say to you,
00:02:14
"Your job is to attach
the candle to the wall
00:02:17
so the wax doesn't drip onto the table."
00:02:20
Now what would you do?
00:02:21
Many people begin trying
to thumbtack the candle to the wall.
00:02:25
Doesn't work.
00:02:26
I saw somebody
kind of make the motion over here --
00:02:31
some people have a great idea
where they light the match,
00:02:34
melt the side of the candle,
try to adhere it to the wall.
00:02:37
It's an awesome idea. Doesn't work.
00:02:40
And eventually, after five or ten minutes,
00:02:43
most people figure out the solution,
00:02:45
which you can see here.
00:02:46
The key is to overcome
what's called functional fixedness.
00:02:50
You look at that box and you see it
only as a receptacle for the tacks.
00:02:54
But it can also have this other function,
00:02:56
as a platform for the candle.
00:02:59
The candle problem.
00:03:00
I want to tell you about an experiment
using the candle problem,
00:03:04
done by a scientist named Sam Glucksberg,
00:03:06
who is now at Princeton University, US,
00:03:08
This shows the power of incentives.
00:03:12
He gathered his participants and said:
00:03:14
"I'm going to time you, how quickly
you can solve this problem."
00:03:18
To one group he said,
00:03:19
"I'm going to time you to establish norms,
00:03:22
averages for how long it typically takes
someone to solve this sort of problem."
00:03:26
To the second group he offered rewards.
00:03:29
He said, "If you're in the top 25%
of the fastest times,
00:03:33
you get five dollars.
00:03:35
If you're the fastest of everyone
we're testing here today,
00:03:39
you get 20 dollars."
00:03:41
Now this is several years ago,
adjusted for inflation,
00:03:44
it's a decent sum of money
for a few minutes of work.
00:03:46
It's a nice motivator.
00:03:48
Question:
00:03:49
How much faster did this group
solve the problem?
00:03:53
Answer:
00:03:54
It took them, on average,
three and a half minutes longer.
00:04:00
3.5 min longer.
00:04:01
This makes no sense, right?
00:04:03
I mean, I'm an American.
I believe in free markets.
00:04:06
That's not how it's supposed
to work, right?
00:04:09
(Laughter)
00:04:10
If you want people to perform better,
you reward them. Right?
00:04:14
Bonuses, commissions,
their own reality show.
00:04:17
Incentivize them.
00:04:20
That's how business works.
00:04:21
But that's not happening here.
00:04:23
You've got an incentive designed
00:04:25
to sharpen thinking
and accelerate creativity,
00:04:28
and it does just the opposite.
00:04:31
It dulls thinking and blocks creativity.
00:04:34
What's interesting about this experiment
00:04:36
is that it's not an aberration.
00:04:37
This has been replicated
over and over again
00:04:40
for nearly 40 years.
00:04:43
These contingent motivators --
00:04:46
if you do this, then you get that --
00:04:48
work in some circumstances.
00:04:50
But for a lot of tasks,
they actually either don't work
00:04:53
or, often, they do harm.
00:04:56
This is one of the most robust findings
in social science,
00:05:02
and also one of the most ignored.
00:05:05
I spent the last couple of years
00:05:06
looking at the science
of human motivation,
00:05:09
particularly the dynamics
of extrinsic motivators
00:05:11
and intrinsic motivators.
00:05:13
And I'm telling you, it's not even close.
00:05:15
If you look at the science,
there is a mismatch
00:05:17
between what science knows
00:05:19
and what business does.
00:05:21
What's alarming here
is that our business operating system --
00:05:24
think of the set of assumptions
and protocols beneath our businesses,
00:05:27
how we motivate people,
how we apply our human resources--
00:05:32
it's built entirely
around these extrinsic motivators,
00:05:35
around carrots and sticks.
00:05:37
That's actually fine for many kinds
of 20th century tasks.
00:05:41
But for 21st century tasks,
00:05:43
that mechanistic,
reward-and-punishment approach
00:05:47
doesn't work,
00:05:49
often doesn't work,
00:05:50
and often does harm.
00:05:51
Let me show you.
00:05:52
Glucksberg did another similar experiment,
00:05:56
he presented the problem
in a slightly different way,
00:05:58
like this up here.
00:06:00
Attach the candle to the wall
so the wax doesn't drip onto the table.
00:06:03
Same deal. You: we're timing for norms.
00:06:06
You: we're incentivizing.
00:06:08
What happened this time?
00:06:11
This time, the incentivized group
kicked the other group's butt.
00:06:17
Why?
00:06:19
Because when the tacks are out of the box,
00:06:21
it's pretty easy isn't it?
00:06:25
(Laughter)
00:06:27
If-then rewards work really well
for those sorts of tasks,
00:06:32
where there is a simple set of rules
00:06:34
and a clear destination to go to.
00:06:37
Rewards, by their very nature,
00:06:39
narrow our focus, concentrate the mind;
00:06:41
that's why they work in so many cases.
00:06:43
So, for tasks like this,
00:06:45
a narrow focus, where you just see
the goal right there,
00:06:48
zoom straight ahead to it,
00:06:50
they work really well.
00:06:52
But for the real candle problem,
00:06:54
you don't want to be looking like this.
00:06:56
The solution is on the periphery.
You want to be looking around.
00:06:59
That reward actually narrows our focus
00:07:02
and restricts our possibility.
00:07:04
Let me tell you why this is so important.
00:07:07
In western Europe,
00:07:10
in many parts of Asia,
00:07:11
in North America, in Australia,
00:07:14
white-collar workers are doing
less of this kind of work,
00:07:17
and more of this kind of work.
00:07:22
That routine, rule-based,
left-brain work --
00:07:25
certain kinds of accounting,
financial analysis,
00:07:27
computer programming --
00:07:29
has become fairly easy to outsource,
00:07:31
fairly easy to automate.
00:07:33
Software can do it faster.
00:07:35
Low-cost providers can do it cheaper.
00:07:38
So what really matters
00:07:41
are the more right-brained
creative, conceptual kinds of abilities.
00:07:45
Think about your own work.
00:07:48
Think about your own work.
00:07:51
Are the problems that you face,
00:07:52
or even the problems
we've been talking about here,
00:07:55
do they have a clear set of rules,
00:07:58
and a single solution?
00:07:59
No. The rules are mystifying.
00:08:02
The solution, if it exists at all,
00:08:04
is surprising and not obvious.
00:08:07
Everybody in this room
00:08:09
is dealing with their own version
of the candle problem.
00:08:14
And for candle problems of any kind,
00:08:17
in any field,
00:08:19
those if-then rewards,
00:08:22
the things around which we've built
so many of our businesses,
00:08:26
don't work!
00:08:28
It makes me crazy.
00:08:30
And here's the thing.
00:08:32
This is not a feeling.
00:08:35
Okay? I'm a lawyer;
I don't believe in feelings.
00:08:38
This is not a philosophy.
00:08:42
I'm an American;
I don't believe in philosophy.
00:08:44
(Laughter)
00:08:47
This is a fact --
00:08:50
or, as we say in my hometown
of Washington, D.C.,
00:08:52
a true fact.
00:08:54
(Laughter)
00:08:57
(Applause)
00:09:00
Let me give you an example.
00:09:02
Let me marshal the evidence here.
00:09:04
I'm not telling a story,
I'm making a case.
00:09:06
Ladies and gentlemen
of the jury, some evidence:
00:09:08
Dan Ariely, one of the great
economists of our time,
00:09:11
he and three colleagues
did a study of some MIT students.
00:09:15
They gave these MIT
students a bunch of games,
00:09:18
games that involved creativity,
00:09:20
and motor skills, and concentration.
00:09:22
And the offered them, for performance,
00:09:24
three levels of rewards:
00:09:26
small reward, medium reward,
large reward.
00:09:30
If you do really well
you get the large reward, on down.
00:09:35
What happened?
00:09:36
As long as the task
involved only mechanical skill
00:09:39
bonuses worked as they would be expected:
00:09:41
the higher the pay,
the better the performance.
00:09:44
Okay?
00:09:46
But once the task called
for even rudimentary cognitive skill,
00:09:51
a larger reward led to poorer performance.
00:09:57
Then they said,
00:09:58
"Let's see if there's any
cultural bias here.
00:10:00
Let's go to Madurai, India and test it."
00:10:02
Standard of living is lower.
00:10:04
In Madurai, a reward that is modest
in North American standards,
00:10:07
is more meaningful there.
00:10:09
Same deal. A bunch of games,
three levels of rewards.
00:10:13
What happens?
00:10:15
People offered the medium level of rewards
00:10:18
did no better than people
offered the small rewards.
00:10:20
But this time,
people offered the highest rewards,
00:10:25
they did the worst of all.
00:10:28
In eight of the nine tasks we examined
across three experiments,
00:10:32
higher incentives led
to worse performance.
00:10:37
Is this some kind of touchy-feely
socialist conspiracy going on here?
00:10:43
No, these are economists from MIT,
00:10:46
from Carnegie Mellon,
from the University of Chicago.
00:10:49
Do you know who sponsored this research?
00:10:51
The Federal Reserve Bank
of the United States.
00:10:55
That's the American experience.
00:10:57
Let's go across the pond
to the London School of Economics,
00:11:00
LSE, London School of Economics,
00:11:03
alma mater of eleven
Nobel Laureates in economics.
00:11:06
Training ground for great
economic thinkers
00:11:09
like George Soros, and Friedrich Hayek,
00:11:12
and Mick Jagger.
00:11:13
(Laughter)
00:11:14
Last month,
00:11:16
just last month,
00:11:18
economists at LSE looked at 51 studies
00:11:21
of pay-for-performance plans,
inside of companies.
00:11:24
Here's what they said:
00:11:25
"We find that financial incentives
00:11:27
can result in a negative impact
on overall performance."
00:11:32
There is a mismatch
between what science knows
00:11:36
and what business does.
00:11:38
And what worries me,
as we stand here in the rubble
00:11:41
of the economic collapse,
00:11:43
is that too many organizations
are making their decisions,
00:11:47
their policies about talent and people,
00:11:49
based on assumptions that are outdated,
00:11:53
unexamined,
00:11:54
and rooted more in folklore
than in science.
00:11:58
And if we really want to get
out of this economic mess,
00:12:01
if we really want high performance
00:12:03
on those definitional tasks
of the 21st century,
00:12:05
the solution is not to do
more of the wrong things,
00:12:11
to entice people with a sweeter carrot,
00:12:14
or threaten them with a sharper stick.
00:12:16
We need a whole new approach.
00:12:18
The good news is that the scientists
00:12:20
who've been studying motivation
have given us this new approach.
00:12:23
It's built much more
around intrinsic motivation.
00:12:26
Around the desire to do things
because they matter,
00:12:28
because we like it, they're interesting,
or part of something important.
00:12:32
And to my mind, that new operating
system for our businesses
00:12:36
revolves around three elements:
00:12:37
autonomy, mastery and purpose.
00:12:41
Autonomy: the urge
to direct our own lives.
00:12:44
Mastery: the desire to get better
and better at something that matters.
00:12:48
Purpose: the yearning to do what we do
00:12:51
in the service of something
larger than ourselves.
00:12:54
These are the building blocks
of an entirely new operating system
00:12:57
for our businesses.
00:12:59
I want to talk today only about autonomy.
00:13:03
In the 20th century, we came up
with this idea of management.
00:13:06
Management did not emanate from nature.
00:13:08
Management is not a tree,
it's a television set.
00:13:12
Somebody invented it.
00:13:14
It doesn't mean
it's going to work forever.
00:13:16
Management is great.
00:13:18
Traditional notions
of management are great
00:13:20
if you want compliance.
00:13:22
But if you want engagement,
self-direction works better.
00:13:25
Some examples of some kind
of radical notions of self-direction.
00:13:29
You don't see a lot of it,
00:13:32
but you see the first stirrings
of something really interesting going on,
00:13:35
what it means is paying people adequately
and fairly, absolutely --
00:13:39
getting the issue of money off the table,
00:13:41
and then giving people lots of autonomy.
00:13:43
Some examples.
00:13:45
How many of you have heard
of the company Atlassian?
00:13:49
It looks like less than half.
00:13:51
(Laughter)
00:13:52
Atlassian is an Australian
software company.
00:13:57
And they do something incredibly cool.
00:13:59
A few times a year
they tell their engineers,
00:14:01
"Go for the next 24 hours
and work on anything you want,
00:14:05
as long as it's not part
of your regular job.
00:14:08
Work on anything you want."
00:14:09
Engineers use this time to come up
with a cool patch for code,
00:14:13
come up with an elegant hack.
00:14:14
Then they present all of the stuff
that they've developed
00:14:17
to their teammates,
to the rest of the company,
00:14:20
in this wild and woolly all-hands meeting
at the end of the day.
00:14:24
Being Australians, everybody has a beer.
00:14:26
They call them FedEx Days.
00:14:29
Why?
00:14:31
Because you have to deliver
something overnight.
00:14:34
It's pretty; not bad.
00:14:36
It's a huge trademark violation,
but it's pretty clever.
00:14:39
(Laughter)
00:14:40
That one day of intense autonomy
00:14:42
has produced a whole array
of software fixes
00:14:44
that might never have existed.
00:14:46
It's worked so well that Atlassian
has taken it to the next level
00:14:49
with 20% time --
00:14:50
done, famously, at Google --
00:14:52
where engineers can spend
20% of their time
00:14:54
working on anything they want.
00:14:56
They have autonomy over their time,
00:14:58
their task, their team, their technique.
00:15:00
Radical amounts of autonomy.
00:15:02
And at Google, as many of you know,
00:15:06
about half of the new products
in a typical year
00:15:08
are birthed during that 20% time:
00:15:11
things like Gmail, Orkut, Google News.
00:15:14
Let me give you an even more
radical example of it:
00:15:17
something called the Results Only
Work Environment (the ROWE),
00:15:21
created by two American consultants,
00:15:23
in place at a dozen companies
around North America.
00:15:25
In a ROWE people don't have schedules.
00:15:29
They show up when they want.
00:15:31
They don't have to be in the office
at a certain time, or any time.
00:15:35
They just have to get their work done.
00:15:37
How they do it, when they do it,
where they do it, is totally up to them.
00:15:42
Meetings in these kinds
of environments are optional.
00:15:47
What happens?
00:15:48
Almost across the board,
00:15:50
productivity goes up,
worker engagement goes up,
00:15:53
worker satisfaction goes up,
turnover goes down.
00:15:57
Autonomy, mastery and purpose,
00:15:59
the building blocks
of a new way of doing things.
00:16:01
Some of you might look at this and say,
00:16:04
"Hmm, that sounds nice, but it's Utopian."
00:16:07
And I say, "Nope.
00:16:10
I have proof."
00:16:12
The mid-1990s, Microsoft started
an encyclopedia called Encarta.
00:16:16
They had deployed
all the right incentives,
00:16:19
They paid professionals
to write and edit thousands of articles.
00:16:23
Well-compensated managers
oversaw the whole thing
00:16:25
to make sure it came in
on budget and on time.
00:16:30
A few years later,
another encyclopedia got started.
00:16:32
Different model, right?
00:16:35
Do it for fun.
00:16:37
No one gets paid a cent,
or a euro or a yen.
00:16:41
Do it because you like to do it.
00:16:43
Just 10 years ago,
00:16:45
if you had gone to an economist, anywhere,
00:16:47
"Hey, I've got these two different
models for creating an encyclopedia.
00:16:51
If they went head to head, who would win?"
00:16:53
10 years ago you could not
have found a single sober economist
00:16:57
anywhere on planet Earth
00:16:59
who would have predicted
the Wikipedia model.
00:17:02
This is the titanic battle
between these two approaches.
00:17:05
This is the Ali-Frazier
of motivation, right?
00:17:08
This is the Thrilla in Manila.
00:17:10
Intrinsic motivators
versus extrinsic motivators.
00:17:13
Autonomy, mastery and purpose,
00:17:15
versus carrot and sticks, and who wins?
00:17:17
Intrinsic motivation, autonomy, mastery
and purpose, in a knockout.
00:17:21
Let me wrap up.
00:17:24
There is a mismatch between
what science knows and what business does.
00:17:28
Here is what science knows.
00:17:29
One: Those 20th century rewards,
00:17:31
those motivators we think
are a natural part of business,
00:17:34
do work, but only in a surprisingly
narrow band of circumstances.
00:17:38
Two: Those if-then rewards
often destroy creativity.
00:17:42
Three: The secret to high performance
isn't rewards and punishments,
00:17:46
but that unseen intrinsic drive--
00:17:48
the drive to do things for their own sake.
00:17:51
The drive to do things cause they matter.
00:17:53
And here's the best part.
00:17:55
We already know this.
00:17:56
The science confirms
what we know in our hearts.
00:17:58
So, if we repair this mismatch
between science and business,
00:18:03
if we bring our motivation,
notions of motivation
00:18:06
into the 21st century,
00:18:08
if we get past this lazy,
dangerous, ideology
00:18:12
of carrots and sticks,
00:18:14
we can strengthen our businesses,
00:18:17
we can solve a lot
of those candle problems,
00:18:19
and maybe, maybe --
00:18:24
we can change the world.
00:18:25
I rest my case.
00:18:27
(Applause)
