Social@Ogilvy, the blog from advertising and marketing firm Ogilvy & Mathers about trends and insights in social media, was very inspired by this blog post. And so they created this very cool graphic recap of it. Check it out above, complete with a rocketing office chair.

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Dan Ariely: What makes us feel good about our work?When you look carefully at the way people work, he says, you find out there’s a lot more at play—and a lot more at stake—than money. In his talk, Ariely provides evidence that we are also driven by meaningful work, by others’ acknowledgement and by the amount of effort we’ve put in: the harder the task is, the prouder we are.

During the Industrial Revolution, Ariely points out, Adam Smith’s efficiency-oriented, assembly-line approach made sense. But it doesn’t work as well in today’s knowledge economy. Instead, Ariely upholds Karl Marx’s concept that we care much more about a product if we’ve participated from start to finish rather than producing a single part over and over. In other words, in the knowledge economy, efficiency is no longer more important than meaning.

“When we think about labor, we usually think about motivation and payment as the same thing, but the reality is that we should probably add all kinds of things to it: meaning, creation, challenges, ownership, identity, pride, etc.,” Ariely explains.

To hear more on Ariely’s thoughts about what makes people more productive – and happier – at work, watch this fascinating talk. Below, a look at some of Ariely’s studies, as well as a few from other researchers, with interesting implications for what makes us feel good about our work.

1. Seeing the fruits of our labor may make us more productive
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   The Study: In a study conducted at Harvard University, Ariely asked participants to build characters from Lego’s Bionicles series. In both conditions, participants were paid decreasing amounts for each subsequent Bionicle: $3 for the first one, $2.70 for the next one, and so on. But while one group’s creations were stored under the table, to be disassembled at the end of the experiment, the other group’s Bionicles were disassembled as soon as they’d been built. “This was an endless cycle of them building and we destroying in front of their eyes,” Ariely says.
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   The Results: The first group made 11 Bionicles, on average, while the second group made only seven before they quit.
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   The Upshot: Even though there wasn’t huge meaning at stake, and even though the first group knew their work would be destroyed at the end of the experiment, seeing the results of their labor for even a short time was enough to dramatically improve performance.
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2. The less appreciated we feel our work is, the more money we want to do it
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   The Study: Ariely gave study participants — students at MIT — a piece of paper filled with random letters, and asked them to find pairs of identical letters. Each round, they were offered less money than the previous round. People in the first group wrote their names on their sheets and handed them to the experimenter, who looked it over and said “Uh huh” before putting it in a pile. People in the second group didn’t write down their names, and the experimenter put their sheets in a pile without looking at them. People in the third group had their work shredded immediately upon completion.
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   The Results: People whose work was shredded needed twice as much money as those whose work was acknowledged in order to keep doing the task. People in the second group, whose work was saved but ignored, needed almost as much money as people whose work was shredded.
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   The Upshot: “Ignoring the performance of people is almost as bad as shredding their effort before their eyes,” Ariely says. “The good news is that adding motivation doesn’t seem to be so difficult. The bad news is that eliminating motivation seems to be incredibly easy, and if we don’t think about it carefully, we might overdo it.”
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3. The harder a project is, the prouder we feel of it
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   The Study: In another study, Ariely gave origami novices paper and instructions to build a (pretty ugly) form. Those who did the origami project, as well as bystanders, were asked at the end how much they’d pay for the product. In a second trial, Ariely hid the instructions from some participants, resulting in a harder process — and an uglier product.
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   The Results: In the first experiment, the builders paid five times as much as those who just evaluated the product. In the second experiment, the lack of instructions exaggerated this difference: builders valued the ugly-but-difficult products even more highly than the easier, prettier ones, while observers valued them even less.
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   The Upshot: Our valuation of our own work is directly tied to the effort we’ve expended. (Plus, we erroneously think that other people will ascribe the same value to our own work as we do.)
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4. Knowing that our work helps others may increase our unconscious motivation
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   The Study: As described in a recent New York Times Magazine profile, psychologist Adam Grant led a study at a University of Michigan fundraising call center in which  student who had benefited from the center’s scholarship fundraising efforts spoke to the callers for 10 minutes.
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   The Results: A month later, the callers were spending 142 percent more time on the phone than before, and revenues had increased by 171 percent, according to the Times. But the callers denied the scholarship students’ visit had impacted them.
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   The Upshot: “It was almost as if the good feelings had bypassed the callers’ conscious cognitive processes and gone straight to a more subconscious source of motivation,” the Times reports. “They were more driven to succeed, even if they could not pinpoint the trigger for that drive.”
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5. The promise of helping others makes us more likely to follow rules
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   The Study: Grant ran another study (also described in the Times profile) in which he put up signs at a hospital’s hand-washing stations, reading either “Hand hygiene prevents you from catching diseases” or “Hand hygiene prevents patients from catching diseases.”
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   The Results: Doctors and nurses used 45 percent more soap or hand sanitizer in the stations with signs that mentioned patients.
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   The Upshot: Helping others through what’s called “prosocial behavior” motivates us.
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6. Positive reinforcement about our abilities may increase performance
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   The Study: Undergraduates at Harvard University gave speeches and did mock interviews with experimenters who were either nodding and smiling or shaking their heads, furrowing their eyebrows, and crossing their arms.
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   The Results: The participants in the first group later answered a series of numerical questions more accurately than those in the second group.
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   The Upshot: Stressful situations can be manageable—it all depends on how we feel. We find ourselves in a “challenge state” when we think we can handle the task (as the first group did); when we’re in a “threat state,” on the other hand, the difficulty of the task is overwhelming, and we become discouraged. We’re more motivated and perform better in a challenge state, when we have confidence in our abilities.
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7. Images that trigger positive emotions may actually help us focus
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   The Study: Researchers at Hiroshima University had university students perform a dexterity task before and after looking at pictures of either baby or adult animals.
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   The Results: Performance improved in both cases, but more so (10 percent improvement!) when participants looked at the cute pictures of puppies and kittens.
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   The Upshot: The researchers suggest that “the cuteness-triggered positive emotion” helps us narrow our focus, upping our performance on a task that requires close attention. Yes, this study may just validate your baby panda obsession.

What have you noticed makes you work harder – and better?

Recently there has been a public outcry against astronomical executive salaries. The basic public sentiment is that it seems unfair that people make so much money for mismanaging our money, especially when it is so difficult to see how bankers’ talents and abilities justify their compensation. Naturally, it’s particularly offensive when executives receive high bonuses after disastrous performances, or, worse, when the bonuses come from taxpayers’ money courtesy of government bailouts.

Not surprisingly, bankers have fought back, claiming that the high salaries are required to attract the best and brightest to crucial, high-stress, high-skill positions, and that the most talented and valuable bankers would go elsewhere if salaries were capped. It is your basic free market argument: if they can’t recruit and retain the best minds in business, these minds will simply go elsewhere, leaving us with less qualified people in charge of the economy—and that, in the end, would send us all down the tube.

Rather than seeing this as an ideological debate between self-serving bankers on one side and morally outraged taxpayers on the other, it is more useful to ask what we really know about the relationships between very large bonuses and job performance.

To look at the question of how bonuses affect performance, Uri Gneezy, George Loewenstein, Nina Mazar, and I conducted a few experiments. In one, we gave participants an array of tasks that demanded attention, memory, concentration, and creativity. We asked them, for instance, to fit pieces of a metal puzzle into a plastic frame, to play a memory game that required reproducing a string of numbers, to throw tennis balls at a target, and a few other such tasks. We promised payments of different amounts (either low, medium, or very high bonuses) if they performed any of these tasks exceptionally well. About a third of the subjects were told they’d be given a small bonus (relative to their normal wages), another third were promised a medium-sized bonus, and the last group could earn a very high bonus.

By the way, and before you ask where you can sign up for this experiment, I should tell you that we did the study in India, where the cost of living is relatively low. By doing it there, we could pay people amounts that were substantial to them but still within our research budget. The low bonus was 50 cents, equivalent to what participants could receive for a day’s work in rural India. The medium bonus was $5, or about two weeks’ pay, and the very high bonus was $50, roughly five months’ pay.

What do you think the results were? Would our participants follow the expected reward pattern with the group offered the smallest bonus performing worst, those offered the medium bonus performing better, and those offered the very high bonus performing best? When we posed this question to a group of business students, naturally they expected performance to improve with the amount of the reward. In the business world this assumption is practically a natural law, and the logic that gets executives to command very high pay. But our experiment results revealed the opposite. As it turned out, the group offered the highest bonus did worse than the other two groups in every single task! And the people offered medium bonuses performed no better or worse than those offered low bonuses.

We replicated these results in a study at MIT, where undergraduate students were offered a chance to earn a very high bonus ($600) or a lower one ($60) by performing two four-minute tasks: one that called for some cognitive skill (adding numbers) and another that required only mechanical skill (tapping a keypad as fast as possible). We found that as long as the task involved only mechanical skill, bonuses worked as we usually expect: the higher the pay, the better the performance. But when the task required even rudimentary cognitive skill (as we might suppose in- vesting and banking do), the outcome was the same as in the Indian study: a potential higher bonus led to poorer performance.

Our results led us to conclude that financial rewards are often a two-edged sword. They motivate people to work well, but when these financial rewards get very large they can be- come counterproductive and actually hurt performance. If our tests mimic the real world, then higher bonuses may not only cost employers more, but also hinder executives in working to the best of their abilities.

When I presented these results to a group of banking executives, they assured me that their own work and that of their employees would not follow the pattern we found in our experiments. (I suggested that with a suitable research bud- get and their participation, we could examine their assertion, but they were not interested.) I strongly suspect that they were too quick to discount our results. I’d be willing to bet that for the vast majority of bankers, if not for all of them, a multimillion-dollar compensation package could easily be counterproductive because of the stress involved in attaining it, because of the fear of not getting it, and because it takes their minds off the job and focuses their attention on the large bonus.

I don’t want to argue that in all situations, regardless of job type or the characteristics of the person, it will be more productive to pay less. But I do want to suggest that compensation is a complex issue involving complex economic incentives, stress, and other aspects of human psychology that we often don’t understand and don’t take into account. Perhaps the naively simple theory that more money equals better performance is not as practical as we thought, at least not all the time. If more money led to better performance, wouldn’t we expect that those who got tens of millions in compensation would be optimal performers? Maybe even perfect? The fact that those with very high salaries and bonuses failed so miserably in the financial fiasco of 2008 should add to the evidence against a direct link between higher rewards and better performances.

The bottom line is that much like in other areas of our lives, we are not perfect, we are not rational, and there are multiple hidden forces that shape our abilities and decisions. We can continue to assume that we are perfect, but this will only set ourselves up for more fantastic failures. If instead we were to realize where we fall short, where we fail, and try to do something about it, our future could indeed be brighter -– and not just in the domain of banking and salaries.

A few related TEDTalks:

1) This one talks about the research I describe in this blog post: Dan Pink >>

2) This one relates to the ways in which regulations can choke motivation: Philip K. Howard >>

3) This one is related to another chapter in the new book (happiness and adaptation): Dan Gilbert >>

– Dan Ariely

On Dan Ariely’s talk: Are we in control of our own decisions?:
So where’s that slightly uglier version of myself ; D ? — Evelyn via facebook

On Mary Roach’s talk: 10 things you didn’t know about orgasm:
.. and that’s why we have swine flu. Good God Man, put on some gloves! — Brenda via facebook

Disclaimer: That pig video does not represent the view of all Danes. ;-) — Klaus

Mary Roach makes pig insemination fun — rutila via Twitter

On Carolyn Porco’s talk: Could a Saturn moon harbor life?:
So? IS THERE OIL THERE?! ;) — Tom via facebook

On Yves Behar’s talk on supercharged motorcycle design:
They should make these with baseball cards in the spokes. — Mayo via facebook

But how about ending things on a sweeter note?

On the exclusive content provided to facebook fans after reaching 100,000 members:
Thank you for daily inspiration and my Master’s thesis topic. Thank you for helping me blow minds, challenge preconceptions and change the world. I’m not ready yet, but someday I’d like to present my research at TED, I would consider it a lifetime accomplishment. — Spencer via facebook

Dan Ariely’s second TEDTalk premieres today — and so does the second, revised and expanded edition of his book Predictably Irrational. It’s full of new material, incuding Ariely’s thoughts on the irrationality of the economic collapse that happened since the book debuted in February 2008. Below, Ariely muses on the way the world has changed between then and now:

Before the financial crisis of 2008, it was rather difficult to convince people that we all might have irrational tendencies.

For example, after I gave a presentation at a conference, a fellow I’ll call Mr. Logic (a composite of many people I have debated with over the years) buttonholed me. “I enjoy hearing about all the different kinds of small-scale irrationalities that you demonstrate in your experiments,” he told me, handing me his card. “They’re quite interesting — great stories for cocktail parties.” He paused. “But you don’t understand how things work in the real world. Clearly, when it comes to making important decisions, all of these irrationalities disappear, because when it truly matters, people think carefully about their options before they act. And certainly when it comes to the stock market, where the decisions are critically important, all these irrationalities go away and rationality prevails.”

Given these kinds of responses, I was often left scratching my head, wondering why so many smart people are convinced that irrationality disappears when it comes to important decisions about money. Why do they assume that institutions, competition, and market mechanisms can inoculate us against mistakes? If competition was sufficient to overcome irrationality, wouldn’t that eliminate brawls in sporting competitions, or the irrational self-destructive behaviors of professional athletes? What is it about circumstances involving money and competition that might make people more rational? Do the defenders of rationality believe that we have different brain mechanisms for making small versus large decisions and yet another for dealing with the stock market? Or do they simply have a bone-deep belief that the invisible hand and the wisdom of the markets guarantee optimal behavior under all conditions?

As a social scientist, I’m not sure which model describing human behavior in markets — rational economics, behavioral economics, or something else — is best, and I wish we could set up a series of experiments to figure this out. Unfortunately, since it is basically impossible to do any real experiments with the stock market, I’ve been left befuddled by the deep conviction in the rationality of the market. And I’ve wondered if we really want to build our financial institutions, our legal system, and our policies on such a foundation.

As I was asking myself these questions, something very big happened. Soon after Predictably Irrational was published, in early 2008, the financial world blew to smithereens, like something in a science fiction movie. Alan Greenspan, the formerly much-worshipped chairman of the Federal Reserve, told Congress in October 2008 that he was “shocked” (shocked!) that the markets did not work as anticipated, or automatically self-correct as they were supposed to. He said he made a mistake in assuming that the self-interest of organizations, specifically banks and others, was such that they were capable of protecting their own shareholders. For my part, I was shocked that Greenspan, one of the tireless advocates of deregulation and a true believer in letting market forces have their way, would publicly admit that his assumptions about the rationality of markets were wrong. A few months before this confession, I could never have imagined that Greenspan would utter such a statement. Aside from feeling vindicated, I also felt that Greenspan’s confession was an important step forward. After all, they say that the first step toward recovery is admitting you have a problem.

Still, the terrible loss of homes and jobs has been a very high price to pay for learning that we might not be as rational as Greenspan and other traditional economists had thought. What we’ve learned is that relying on standard economic theory alone as a guiding principle for building markets and institutions might, in fact, be dangerous. It has become tragically clear that the mistakes we all make are not at all random, but part and parcel of the human condition. Worse, our mistakes of judgment can aggregate in the market, sparking a scenario in which, much like an earthquake, no one has any idea what is happening. All of a sudden, it looked as if some people were beginning to understand that the study of small-scale mistakes was not just a source for amusing dinner-table anecdotes. I felt both exonerated and relieved.

While this is a very depressing time for the economy as a whole, and for all of us individually, the turnabout on Greenspan’s part has created new opportunities for behavioral economics, and for those willing to learn and alter the way they think and behave. From crisis comes opportunity, and perhaps this tragedy will cause us to finally accommodate new ideas, and — I hope — begin to rebuild.

Watch Dan Ariely’s talk from EG’08 on TED.com, where you can download this TEDTalk, rate it, comment on it and find other talks and performances from our archive of 400+ TEDTalks.

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Watch Dan Ariely’s talk from TED2009 on TED.com, where you can download this TEDTalk, rate it, comment on it and find other talks and performances from our archive of 400+ TEDTalks — including more unconventional explanations.

On the TED Blog: Read Dan Ariely’s take on the Bernie Madoff scandal >>

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Dan Ariely, the author of Predictably Irrational, presented a jaw-dropping talk on cheating and dishonesty at TED2009. We’re posting Ariely’s TEDTalk next Tuesday, and we asked him for his thoughts on the Bernie Madoff scandal unfolding now in New York:

The first chapter of the Bernie Madoff fiasco has come to a close, with Madoff pleading guilty to 11 charges of fraud yesterday.

Madoff’s massive Ponzi scheme was horrific on many levels. But while we watch the next phase of the scandal, it’s important to ask: What lessons are we going to learn from this? I can see three lessons that relate to my work studying human irrationality — and in particular, some non-useful lessons we might learn.

One lesson that individuals and foundations are likely to take from the Madoff scandal is that in addition to diversifying their portfolio across several investments (stock, bonds, equity, cash), they also need to diversify their investments among several advisors. While the idea of diversifying among advisors has some merit — and it could reduce the exposure risk of another Madoff scandal — it will also make the task of managing portfolios much more difficult and much less efficient. Imagine that you have $1,000,000, split among four advisors. You will need a whole new level of coordination among them so they can have the right amount of cash, bonds, stocks etc., across all of your assets.

And I think that people will begin to over-diversify across investors. Why? Because when we have one large and salient instance in our minds, it can be so powerful that we overemphasize it. This same effect is very apparent in what we call “the identifiable victim effect,” and it is the reason that we overemphasize the risks of a shark attack, and underestimate the risks of riding a bike without a helmet. In general, what we find when there’s one single vivid event is that people overweight it — we focus on it too much. So that’s the first lesson: We’re going to learn from the Madoff scandal, but we are going to overdo it.

Read the full essay from Dan Ariely — including two more non-useful lessons — after the jump >>

And watch for Dan Ariely’s TEDTalk next Tuesday, March 17.

Dan Ariely will be speaking in New York City on Monday, March 16, on the floor of the New York Stock Exchange. Details here >>

Photo: TED / Asa MathatDan Ariely offers 3 irrational lessons from the Bernie Madoff scandal

The first chapter of the Bernie Madoff fiasco has come to a close, with Madoff pleading guilty to 11 charges of fraud yesterday.

Madoff’s massive Ponzi scheme was horrific on many levels. But while we watch the next phase of the scandal, it’s important to ask: What lessons are we going to learn from this? I can see three lessons that relate to my work studying human irrationality — and in particular, some non-useful lessons we might learn.

One lesson that individuals and foundations are likely to take from the Madoff scandal is that in addition to diversifying their portfolio across several investments (stock, bonds, equity, cash), they also need to diversify their investments among several advisors. While the idea of diversifying among advisors has some merit — and it could reduce the exposure risk of another Madoff scandal — it will also make the task of managing portfolios much more difficult and much less efficient. Imagine that you have $1,000,000, split among four advisors. You will need a whole new level of coordination among them so they can have the right amount of cash, bonds, stocks etc., across all of your assets.

And I think that people will begin to over-diversify across investors. Why? Because when we have one large and salient instance in our minds, it can be so powerful that we overemphasize it. This same effect is very apparent in what we call “the identifiable victim effect,” and it is the reason that we overemphasize the risks of a shark attack, and underestimate the risks of riding a bike without a helmet. In general, what we find when there’s one single vivid event is that people overweight it — we focus on it too much. So that’s the first lesson: We’re going to learn from the Madoff scandal, but we are going to overdo it.

Another non-useful lesson that I think we will adopt is to start searching with more vigor for other bad apples. On one hand, it is clearly important to prevent more Madoffs, but at the same time I worry that as a consequence of searching for bad apples, we won’t pay enough attention to other financial behavior that might not be as badly wrong but that can actually have larger financial consequences.

In our research on dishonesty, we found that when we give people the opportunity to cheat, many of them cheat by a little bit, while very few cheat by a lot. In our experiments, we lost about $100 to the few people who cheated a lot — but lost thousands of dollars to the many people who each cheated by a bit. I suspect that this is a good reflection of cheating in the stock market, where the real financial cost of the egregious cheating by Madoff is actually a tiny fraction of all the “small” cheating carried out by “good” bankers.

The risk here is that if we pay too much attention to chasing bad apples, we might pay too little attention to the situations where the small dishonesties of many people can have large consequences (such as paying slightly higher salaries to cronies, making small changes to financial reports, doctoring documents, being slightly dishonest about mortgage terms), and in the process neglect the real economic source of the trouble we are in.

A third bad lesson that I think people will take from this concerns the way we define acceptable levels of cheating. In a study that may parallel Madoff’s egregious dishonesty, we again gave the participants the opportunity to cheat, while solving a puzzle quiz — but this time we hired an actor. This actor, posing as a fellow participant, stood up at the start of the session and declared that he had solved all the puzzles. Now the question is how his behavior would influence the other participants in the room — the ones who were watching him.

What we found is that when the actor wore a plain T-shirt, which made him part of the student group, cheating increased. On the other hand, when the actor wore a T-shirt of the rivaling university, cheating decreased. What this means is that when someone who is part of our own social group cheats, we find it more acceptable to cheat, but when people who are not part of our social group cheat, we want to distance ourselves from these people and cheat less.

Madoff was part of the financial elite — part of an in-group of our financial leaders. Think of all these people who were in his house, who knew him well. So now, when other people in this circle see him cheating, think about the long-term consequences: Would these other people in this financial industry now be more likely to take the immoral path? It doesn’t have to be another Ponzi scheme. It just means that, now that they have been exposed to this extreme level of dishonesty, they might adopt slightly lower moral scruples. Maybe they will start not letting their clients know exactly what they own and what they don’t own, or change a little bit the interest rate that they’re charging them … I don’t think that those in his circle will necessarily become more Madoff-like people, but I do suspect that they will get a substantial relief from their moral shackles. Sadly, that’s his legacy.

So, Chapter One of the Madoff scandal is over, but I worry that the negative downstream consequences of this experience are just starting …

Dan Ariely became intersted in behavioral science while in hospital & thinking abt what hurts more: rip off bandage fast or slow — brainpicker

Dan Ariely: “A lot of people cheat a little bit regardless of incentive or risk.” — heartnsoul

“Signing an honor code reduced cheating significantly.” — heartnsoul

Dan Ariely shares a lesson from behavioral economics “We have many intuitions in life, and many of those intuitions are wrong.” — brainpicker

Behavioral economist Dan Ariely at #ted gives great talk on cheating/intuition. “Unless we test our intuitions we won’t do better” — HelenWalters

Ariely is killer awesome. He shows the nuances for predictability instead of painting a b&w picture of economics and stats. — missrogue

Our intuition says that TED really liked Dan. Is Twitter snapshot a viable test?