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75 of 89 people found the following review helpful
5.0 out of 5 stars Well worth the wait., May 27, 2010
This review is from: The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home (Hardcover)
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Fans of Predictably Irrational will be pleased with the second installment into what appears to be an "Irrational" series.

I would quibble with the title and the subtitle of the book but what really matters is what is between the covers.

Without giving away a book full of hard earned research results, perhaps capturing a clip from the book will best describe why this book will do so well.

In a comparison of perceived clutch basketball players with bankers, you find out that there really is not much evidence for a category of "clutch" basketball players. Yes, these players get the ball more in the final five minutes of the game, and therefore score more points but they perform no better or worse than they do in the rest of the game. The notion of the "clutch player" is not completely negated, but evidence is brought forth that any apparent higher caliber play in the final five is simply a function of more opportunities.

The reason this research was done was to build on research conducted in India using a limited bank account but wanting to find out just how performance bonuses might motivate people.

Various individuals are offered a chance to be given certain amounts of money based upon how well they perform in 8 games. It turns out the more money possible to be scored, the more likely the individual was to fail at the games. There was a bump over people performing for little more than a few hours of their time taken up but a more significant bump for individuals who received moderate sized "bonuses."

The experiment was laid out to show that large bonuses...amounting to as much as 5 months worth of income if medium difficulty level tasks were completed...don't motivate but actual interfere with performance.

Ariely was obviously on top of the notion that this part of India was incredibly poor so having a chance at 5 months worth of income was truly dramatic.

As I read this I thought, "yes but could this be the difference between eating and not eating, or is this the difference between buying a TV or not having a TV."

With that mindset I found the results fascinating.

If you've ever watched the TV Show Survivor, you've seen similar behaviors by people who consistently lose. People who let the pressure get to them because the clock is ticking... can do nothing but fail, and do indeed fail. But in Survivor there is always a winner. Some adapt. Some do not. An area for further study perhaps.

I suspect Ariely's findings will generalize in most areas of business. It's hard to imagine that mega-bonuses do anything but reduce performance. Sharing a similar view with an audience of bankers he reports having found little support for his notion. No surprise to Ariely or the reader.

Perhaps most interesting are his final thoughts on this specific topic which is decision makers he's spoken to at companies seem clueless as to the effects of bonuses on performance and they seem uninterested in testing to find out what the results are.

Each section in the book is filled with nuggets. There are many aha's to the wise. There are many moments of "Oh I knew that already," because the human mind is geared to have excellent hindsight and great ability to change what we would have predicted before the fact... Trying disengage from that bias is not as easy as one might think!

The Upside of Irrationality delves into a host of fascinating areas.

The research goes into the dating arena. Ariely shows us why we overvalue the things we make ourselves. He explains many things not covered by others in the field including a very nice indepth look at why we seek justice.

Like it's predecessor this book entertains, informs and gives pause for thought in your (my) own life.

Kevin Hogan
Author of The Psychology of Persuasion: How to Persuade Others to Your Way of Thinking
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Showing 1-4 of 4 posts in this discussion
Initial post: May 29, 2010 12:12:38 PM PDT
John Doe says:
"I suspect Ariely's findings will generalize in most areas of business. It's hard to imagine that mega-bonuses do anything but reduce performance."

I disagree on both counts. I don't think the findings will generalize because most businesses don't put a person under the sort of minute-to-minute pressure they'd experience during a basketball game. Instead, the key to success in business is to actually work and accomplish things to impress your superiors, customers, etc. instead of slack off.

And this is empirically true--people who found companies will earn mega-bonuses if their companies succeed, and they work harder than most anyone else. In non-toy scenarios, paying for performance really does work.

In reply to an earlier post on Jun 7, 2010 9:54:30 AM PDT
CT says:
@John: You are talking about people who found companies. They have a huge stake in the company because they founded it. You cannot say that high bonuses were the only (or even dominant) variable in that scenario. This is apples and oranges, normal employees of a large company are much different, where this result of extrinsic reward not leading to better performance has been proven over and over again. It's all about intrinsic motivation; people do well when they feel that doing well will benefit them at a deeper, more philosophical level.

And I haven't read the book but I don't think "irrational" is the right word here. It seems like "unintuitive" would be more apt.

In reply to an earlier post on Jun 20, 2010 11:48:07 PM PDT
John Doe says:
In his article for Inc. magazine, Bill Witherspoon explains how the employees of his cooperatively-run company decided to

"distribute 50 percent of net profit to everyone, providing there have been no late shipments since the last bonus, cash does not drop below six months' operating expenses, and we have experienced positive cash flow for the previous 12 weeks"

I recall reading that statistically, employees tend to work harder at this sort of cooperatively owned company where every employee is a stockholder. Does that sound plausible to you? And if so, what is the key differentiating factor between this scenario and one in which performance bonuses are awarded on a more ad-hoc basis? Maybe you think that people get demotivated when they're awarded bonuses that are attached to how well they please their boss? (Seems unlikely to me, but perhaps my psyche is better suited to boss-pleasing than average.)

"this result of extrinsic reward not leading to better performance has been proven over and over again"

Can you cite specific studies? I've already explained why the studies Dan cites don't show this--they all take place over an unrealistically short period of time. Dan's examples are bad because they show people failing at tasks because they become *too* motivated--which is *not* the problem of the modern employer.

Posted on Jun 21, 2010 7:21:55 AM PDT
mostserene1 says:
This was an informative review. And Kevin himself has written some surprisingly insightful books on human behavior. So I rely on his expertise in this area and will buy the book.
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