Are bankers bonkers

I was recently giving a talk to about 200 engineers at one of the regions most innovative and successful companies. When we got to the Q&A, one of them asked me “Are you motivated by making money?”

No doubt he was thinking of the recent outrage over the bankers claiming that they need their bonuses in order to be incentivised to do their jobs, when even Sir Philip Hampton, Chairman of the Royal Bank of Scotland, called them “extraordinarily highly paid”.

The question got me thinking about some discussions I’ve been having recently with economists who’re trying to incorporate innovation into their theories. Surprisingly, it’s only in the last decade that they have started to wake up to the fundamental economic importance of innovation.

I suspect that one of the difficulties they are finding in thinking meaningfully about innovation, is their deep seated assumption that people are primarily motivated by money. Clearly, in a modern market economy we all need money, and most people would prefer to have more rather than less, but all the evidence is that money can often act like a de-motivator when it comes to creative performance.

The social psychologist Therese Amabile ran laboratory tests in which students were asked to make collages under different conditions. She showed that offering financial rewards actually reduced creative performance. Similarly most artists’ commissioned work is less creative than their non-commissioned work. Her conclusion, which is well supported by practical experience of innovative businesses, is that creativity is motivated by the internal driving factors, such as interest, challenge and personal satisfaction (these are known as intrinsic factors), rather than external factors like prizes, fame and financial rewards (known as extrinsic factors)

The importance of intrinsic motivation extends beyond individual success into business success. As the management thinkers Collins and Porras pointed out in their classic book “Built to last”, the most successful and visionary companies care about more than just profits.   They don’t ignore profitability, but focus primarily on a clear underlying and enduring purpose. For example, in Ford’s early days they decided that their purpose was to “democratise the automobile”. Google’s is “to facilitate access to information for the entire world”. This sense of purpose taps into the deep seated human drive to make a difference, and so is very effective in motivating people to be innovative, focus their efforts where it makes sense and work hard. If the company succeeds in this, almost invariably the money follows.

Others have looked at what happens in our brains when we think about money. Psychologists Stephen Lea and Paul Webley suggest that it acts on our minds rather like an addictive drug, activating the pleasure centres in the same way as food or sex. This can even be seen in brain scans. They suggest that this is maybe why it has the power to drive some of us to compulsive gambling, overwork or spending.

In the real world, as opposed to the financial fantasy-land of the economists, people are both cooperative as well as competitive. I’d always assumed that economists’ blindness to this was due to a simple intellectual or political difference of opinion, but recent research suggests that this difference in attitude may have its origins deep in the brain. Kathleen Vohs in the department of marketing at the University of Minnesota showed that when student volunteers were primed with money related words like “salary” or “cost”, they were both more self sufficient and less likely to help a fellow student than when primed with non money related words like “chair” or “cold”. I find this fascinating and worrying. Because as economists and bankers are going to be constantly re-stimulated with money related words, it will be hard for them to avoid being tipped into a mindset that emphasises self sufficiency and competition over cooperation and helpfulness.

Given that mindset, it may make total sense to claim that you need a million pound bonus to motivate you to do your job, even though to the rest of us it seems bonkers and no more than selfish greed.

Getting back to creativity, money is not at the top of the list of most creative people’s motivations (and mine too). In order to be successfully creative, we need to immerse ourselves deeply in a challenge that we care about, so thinking about the potential future rewards is actually a distraction. Tempting though it may be to drift off into a daydream in which one owns a Billion pound company, gets a Nobel prize or becomes a best selling author.

For people who are facing difficult situation, there may be some comfort in the idea that, even if the bankers are bonkers, you may be much better placed to come up with a creative route out of your difficulties than they are.