PAUL SOLMAN: The candle, box of tacks, book of matches, an old puzzle with a strangely relevant economic message. Objective? Fix the lit candle to the wall so no wax hits the table.
Economics: The faster you do it, the more money you make. Punchline: Conventional economics is wrong, because the greater the monetary incentive, the longer the solution takes, a solution you will see in a bit.
Relevance? Executive pay and Wall Street bonuses, which might not enhance, but actually retard, high performance, or so says writer Dan Pink, once Al Gore’s chief speechwriter. Pink’s first book, “A Whole New Mind,” made waves by arguing that skills linked to the creative right side of our brains dominate today’s global economy, instead of left hemisphere thinking.
DANIEL PINK, author, “Drive”: Logical, linear, sequential, analytical, SAT abilities, spreadsheet abilities, and, today, those abilities are essential, but they’re not enough. And it’s now abilities characteristic of the right hemisphere: artistry, empathy, inventiveness, big-picture thinking.
And that’s changed the game of business, too, because what its done is, it’s put a premium on coming up with something new, profoundly new, iterating something the world didn’t know it was missing.
PAUL SOLMAN: Pink’s new book, “Drive,” takes the next step: You motivate right brain creativity with more human, less material incentives.
DANIEL PINK: We tend to think that the way you get people to perform at a high level is, you reward what you want and punish what you don’t want, carrot and stick. If you do this, then you get that.
That turns out, the science says, to be an extraordinarily effective way of motivating people for those routine tasks, simple, straightforward, where there’s a right answer. They end up being a terrible form for motivating people to do creative conceptual tasks.
PAUL SOLMAN: How does the science show this?
DANIEL PINK: If you offer me a reward, $500 reward, you have my attention, absolutely. A contingent reward gets you to focus like this, narrow vision. If the answer is right in front of you, that’s terrific. You race a lot faster. But if you have this kind of vision for a creative conceptual problem, you’re going to blow it. You’re not going to do anything good.
PAUL SOLMAN: Now, before you economists out there click to some stock market channel, a bit more of the candle experiment, run in the ’60s by psychologist Sam Glucksberg. He offered $5, maybe 50 bucks in today’s money, to those who solved it faster than most people, but $20, $200 today, for the fastest time of all.
With eyes on the prize and time of the essence, many folks melted the side of the candle and tried to stick it to the wall, a quick way, it turned out, to watch your hopes melt.
PAUL SOLMAN: Meanwhile, Dan Pink took us to Hunt Valley, Maryland, to show us non-material incentives in action.
MAURY WEINSTEIN, CEO, System Source: Welcome to our computer museum.
PAUL SOLMAN: Maury Weinstein has been marketing personal computers since their debut in 1981.
MAURY WEINSTEIN: The original IBM P.C…
DANIEL PINK: Oh, man.
MAURY WEINSTEIN: … with two floppy drives. Behind us, the Commodore PET was very interesting because it had the lift-up hood.
DANIEL PINK: So, it was easy to service.
PAUL SOLMAN: Is this the Lisa or this…
MAURY WEINSTEIN: This is the original Macintosh. Lisa is right next door.
PAUL SOLMAN: The trip down RAM memory lane reminded us that, in the high-tech era, computer sellers have come and gone as fast as the hardware they have peddled. Yet, this firm, System Source, has grown for three decades, a key reason, says the CEO, the decision to drop sales commissions 15 years ago.
He explains, with a hint of Karl Marx.
MAURY WEINSTEIN: We find that money often disrupts relationships. It disrupts customer efforts. And, sometimes, it makes the customer feel like a piece of meat, where you can’t trust the salesperson’s recommendations. And that’s a very slippery slope at that point.
MAN: This is Jason calling from System Source P.C.s.
PAUL SOLMAN: Weinstein says sales spurted 44 percent as soon as commissions were canned in 1994. Profitability rose threefold.
Ed Johnakin, a system source salesman for 17 years, says commissions have a downside.
ED JOHNAKIN, Salesman, System Source: Some salespeople may push customers into things that they might not necessarily need.
PAUL SOLMAN: Did you ever do that?
ED JOHNAKIN: No, no, no, no.
ED JOHNAKIN: Yes, maybe once or twice.
PAUL SOLMAN: So, no commission, no incentive to sell stuff customers might be better off without.
Salesman John Burke.
JOHN BURKE, Salesman, System Source: I’m not looking to strike it rich or hit a pot of gold with one deal and then move on. I’m looking to foster a long-term relationship with a customer.
PAUL SOLMAN: But were we perhaps seeing System Source through Pink-colored glasses?
DANIEL PINK: I think System Source is fundamentally an early adopter for a very new approach to business, which basically says that people have other motivations besides grabbing that carrot, that they actually want to do good work.
PAUL SOLMAN: Speaking of good work, figured out the candle answer yet?
With dollar signs in their eyes and the clock ticking in their heads, some folks tack the candle to the wall. That falls flat — no surprise, though, to Swarthmore psychologist Barry Schwartz, who’s studied motivation for decades.
BARRY SCHWARTZ, psychologist, Swarthmore College: Money isn’t a natural part of anything we do. It’s not a part of practicing medicine. You know, the natural thing to practicing medicine is healing people. Getting paid for it is unnatural, similarly with law and with any profession, teaching. So, maybe what happens is that what money does is, it disconnects people from the real point and purpose of their activity.
PAUL SOLMAN: Case in point, Wall Street bonuses, which, Schwartz insists, fueled the crash.
BARRY SCHWARTZ: It created in people who ran these companies unbelievable short term-ism, because all that mattered was making the company look good for the next quarter or the next year, so that they would get a huge bonus in the form of stock options, which they would then cash in. And what the consequence was for the company five years down the road was of no concern to them — a disaster.
PAUL SOLMAN: Now, if cash incentives don’t even work for salespeople, says Dan Pink, think how useless they are in a right brain world. Consider Wikipedia, the world’s largest source of free information or the free Web browser Firefox, open-source projects created and developed by users for no pay at all.
And why would labor the world over work for free?
SERGE KNYSTAUTAS, open-sourcer: I think by contributing to open-source communities, you can get some gratification and praise and really give yourself a sense of purpose.
PAUL SOLMAN: We gathered a group of open-sourcers in Washington.
CELESTE LYN PAUL, Open-Sourcer: You’re working with people that you like. You’re doing things that you love to do. And it’s just very fulfilling. So, money isn’t the only reason why somebody might want to contribute to it.
PAUL SOLMAN: You’re describing a world that sounds like a marketplace, but it just doesn’t have any money in it.
JOHN YODSNUKIS, Open-Sourcer: You know, you need adequate compensation. You have to live. You have to survive, OK? But, if you ask an artist why they became an artist, a lot of them will say, I can’t do anything else. I have to do this.
It’s the same thing here, you know? It’s the fulfillment, the love of doing it is reason enough.
PAUL SOLMAN: Yes, admits Pink, people need enough dollars to survive. Most of these folks have day jobs. But, after that, humans want autonomy, a sense of purpose, mastery.
DANIEL PINK: We do things because they’re interesting. We do things because we like them. We do things because we get better at them, because they contribute to the world, even if they don’t have a payoff in getting a reward or satisfying some — some biological drive.
This is not a plea for a kinder, gentler approach to business. This is a plea for saying, let’s wake up. Let’s get past our outdated assumptions, and let’s actually run businesses in concert with what the science shows about human performance.
PAUL SOLMAN: Which brings us back to our experiment, one of many over the years that have come to the same conclusion — 128 people took part in the original candle experiment. Those offered money averaged 11 minutes to solve it.
But it turned out that, counter to the predictions of classical economics, those people offered no money at all discovered the solution much faster: tacking the box to the wall, to hold the candle and catch any dripping wax. They did it in an average of just seven-and-a-half minutes, instead of 11, and, thus, the punchline of this story and Dan Pink’s new book: To succeed in today’s global economy, it’s the fire within that must be lit.