How do incentives really work? with Uri Gneezy (Transcript)

[00:00:00] Adam Grant:
Hey everyone, it's Adam Grant. Welcome back to ReThinking, my podcast on the science of what makes us tick. I'm an organizational psychologist and I'm taking you inside the minds of fascinating people to explore new thoughts and new ways of thinking.

My guest today is Uri Gneezy. He's a leading behavioral economist, and his clever experiments are all over Freakonomics. His new book Mixed Signals explains how incentives really work. Why do we take certain actions and sometimes choose not to act at all? And how do we make sure that rewards don't backfire?

So I'd love to start by asking you how you got interested in incentives, and I know that one of the defining moments in your career happened at a daycare.

[00:00:49] Uri Gneezy:
Right. As a behavioral scientist, behavioral economist, I like to start my research, start my thinking by looking at the world, looking at things that happened to me. The stuff you mentioned about the daycare happened in the late nineties. The daycare where my daughters were, the teacher always told us to be on time. And I remembered that, uh, once, uh, we were at lunch in Tel Aviv. We were running late. I drove like crazy because you need to be there by 4:00 PM to pick up your girls. Right? That's what a good person does.

And then the principal came up with an interesting incentive. She gave a fine of 10 shekels, which was about $3 at a time for parents that came late more than 10 minutes. Again, we were in Tel Aviv again, lunch again. Surprisingly there was traffic. This time I didn't drive like crazy ‘cause I'm not going to risk my life for $3. That's where I started to think about how negative incentives could actually be crowding out my motivation. And we ran an experiment based on this field experiment with some control daycares. I wasn't the only one. So other people also were also more likely to show up late when we introduced the fines. But what was even more interesting I think, is that once we took out the fine, these parents continue to come late, so it is as if they got used to it.

And the story that we have, and that's basically one of the regions of this book, is that the incentive signal stops. Before that, I didn't know how bad it is to be late. Now that you told me that it's $3 bad, now I don’t care. Right? I’m not going to risk my life. I know that it's not that bad. $3 cannot be that bad. And that's how I updated the signal that the incentive introduced, updated my beliefs about the situation.

[00:02:24] Adam Grant:
I think there are multiple interesting signals that come here. So you know, one is 
“I shouldn't risk my life for $3”. Another is, “Wow, this is really cheap extra daycare”.

[00:02:34] Uri Gneezy:
Right, so the cheap extra daycare was true while the incentives were there. Right, so then I can say, “Look, it's a babysitting for $3. I can leave them for another half an hour.” That's great.

[00:02:44] Adam Grant:
I remember first reading about this research and thinking, “This is a beautiful demonstration of something that psychologists have studied in the lab for a long time, but rarely demonstrated the real world’s, real-world consequences of.” And I wanted to immediately get inside people's heads and try to figure out, okay, what's happening here? Is it that you've essentially undermined their moral desire to be on time for their kids? Is it that you've essentially legitimated the behavior and said, “Look, you know, the school doesn't really think this is terrible.” Is it a combination of the two? What do you know about what goes on in the mind of the typical parent in a situation like that?

[00:03:19] Uri Gneezy:
I think that it's a combination of what you said with a stronger weight on the second one; it’s the information part. I didn't know how bad it is now. You told me it's $3. That's fine.

The first part that you mentioned is also that if the social norm is for everyone to be on time, I'll be on time because I don't want everyone to look at me as the bad guy. Now if other people are starting to come late, it becomes kind of, uh, that's fine. Once you cross over there, it's very hard to go back.

[00:03:44] Adam Grant:
Then, the next question it raised for me is “Is this a situation where we should avoid incentives altogether?” Because there already is a level of moral or intrinsic motivation to show up, or is there a better incentive system that you could create?

[00:03:57] Uri Gneezy:
Right. So you can think about few aspects of this. First of all, you can make the incentives really high, and that doesn't have to be money. In other places, someone told me that in Paris, if you are late to pick up your kids, at some point the principal will take the kid to the police station and you'll have to pick them up. Right? That's, that's going to be very costly with therapy later on. Right? So it doesn't have to be money—

[00:04:16] Adam Grant:
For the, wait for the parent or the child?

[00:04:19] Uri Gneezy:
Both. Both. I think. Even if you make it really expensive and they don't care about the money, the signal that they get is that it's really important for you. You need to go home. So then I might even reduce doing this because the signal that I get will be “It's really bad for you”. So I think that somewhere over there should be the way to, to fix it. In this case, it's just the size of the incentive.

[00:04:39] Adam Grant:
Incentives are powerful, but they don't always have the impact that we intend, and they're full of unintended consequences and side effects. They're almost like taking a drug that hasn't been fully vetted yet. A lot of people assume that, that incentives are straightforward. You reward the behavior you want, you get more of it. You punish the behavior you don't want, you get less of it.

And you have a radically different view of incentives. So maybe building on the daycare study, what is your view of how we should understand the effects of incentives and especially how we should anticipate the side effects and unintended consequences?

[00:05:13] Uri Gneezy:
Incentive work. There is no question about that. Incentives move our world. Without incentive the world would look very different. That point is exactly what you said, that sometimes we don't understand how they're going to work and sometimes or too often, I see companies that tell me, “Oh, we tried incentives. It didn't work.”

And to me, it's like saying, “I went to a bad Japanese restaurant and the food was bad, and from that, concluding the Japanese food is bad.” No, you just went to a bad restaurant, or you just designed a bad incentive.

There are two solutions for this. The simpler one is just to think about it. Think: what do you say? What's the message that you send when you give incentives? Very often people fail in this stage. The second one is more complicated because very often we think that we know what people will do, and even if you're really amazing, you try to run experiments, you were surprised by their results, and then you try it again and you see that your intuition was wrong. So when you design incentives, you have to do the same. You need to test them, see if it works. If it works like you wanted, great. If not, modify them until you get it right.

[00:06:11] Adam Grant:
When you think about the mixed signals that incentives send, it seems like at least your early arguments track with that classic Steve Kerr article about the folly of hoping for A while rewarding B, and I should clarify, I'm talking about Steve Kerr, the Chief Learning Officer, not the basketball player turned coach.

I think it was what, back in, in 1975, that, that Kerr said, “Look, you know, organizations do this all the time. Managers are constantly saying, We want one thing, but then we're incentivizing a different behavior.”

You say, “We want people to collaborate, but we're only gonna reward people and promote people on the basis of their individual results. We want people to think about innovating for the long term, but we're only gonna reward and promote on quarterly returns.” We're half a century after that article. Why are we still making this mistake?

[00:06:55] Uri Gneezy:
I think, to a great extent because we don't understand that we are doing it, that we're making the mistake. The more general story is that the management can tell you one thing. You know, “we want you to drive carefully” or “we want you to pay attention. Quality is all we care about.” Teamwork, innovation. But then, you know, you try to innovate, you fail because if you try to innovate, you're going to fail. You're more likely to fail, and then they punish you, fire you or whatever, right?

That's, that's just wrong, right? Someone failed. You should say what happened, and I think that to a great extent. You need to change your understanding of what you're asking people. You are asking people to invent and you want them to be successful, but sometimes they're not going to be successful. Understand that if your incentives will not support this, it won't happen.

[00:07:34] Adam Grant:
I think one of the questions that raises then is, when should I use incentives to motivate behavior and when shouldn't I? So if we stick with managers for a second, my read of the evidence on performance incentives is that for the most part, they don't undermine performance, but that that reward is much more effective in motivating performance quantity than quality.

So incentives may boost productivity to a much more effective degree than they promote creative thinking. In other words, maybe it's easier to motivate people with incentives to work harder than it is to work smarter. Thoughts?

[00:08:05] Uri Gneezy:
So first of all, if you ask psychologists, you read the psychology literature, people go to work because they want fulfillment and engagement and all the good stuff. You ask economists, they tell you no. They go because they need to pay rent. And of course, these two strawmen are just strawmen, right? So I go to work because they need to pay the rent and because I enjoy it, because I want to be good at it. Now, the question is “What does it mean to be good at it?” Say that I'm a bus driver and they don't know what it means to be a good bus driver.

All, all in all, I want to do a good job. Now management tells me drive safely and I want the passengers to be happy. That's one message that they send, but then they pay me, say, for passengers that I pick up on the way. That message tells me that they really want me to pick as many passengers as possible. That it's not really safety, it's not really customer service. It's really getting as many as they want, and I'm taking this message into heart, and that's what I'm going to follow, right?

So I do want to be a good employee in this case, even if it's not about the money. I really pick up the signals of what does it mean to be a good driver or a good employee or a good person in general from the incentives that are out there. About the first question that you ask or where you started, I think that you cannot have a situation without incentives. It's like not making a decision is also a decision, right? So the status quo also includes incentives. So if you don't use incentive, which is fine in some cases, you need to understand that other incentives are already in place.

[00:09:27] Adam Grant:
With that in mind, I was fascinated by your discussion of paying people to quit their jobs, which has been, I think, a subject of, of debate ever since Tony Hsieh started doing it at Zappos. What should we make of that idea?

[00:09:40] Uri Gneezy:
So I teach here the negotiation class, and I tell them you shouldn't lie. Lying in negotiation is a bad idea. And I try to give them reason, from ethical to reputation to whatever. The only time when you should lie is in a job interview showing excitement about the job.

If you're not excited about coming to work for me, why would I hire you? Your value really depends on how excited you are, and I think that many people understand it and they're going to always show at least that they're excited. If you ask 'em, are you happy with the job? They'll tell you, “Yes, I'm excited to work here.”

So just asking people “Are you happy and do you want to stay and be productive?” will not get you the right answer. In economics, we call it making it incentive-compatible. So you're saying that you want to stay here. Okay. What if I pay you $20,000 to leave? Some people will jump and say, “Thank you. Where do I sign?”

And you know that these people were not that happy to be with you. And it's actually not that bad that they go. You should part with them. Tell them, “:ook, if you decide to take it, that's fine. We are happy. Thank you for what you did so far, and let's stay friends.”

On the other end, those who choose to stay, you get two effects. First of all, it's a selection. You know that they really want to be here, otherwise they would've left. And second, now they'll have to convince themselves that they made the right choice. Right, so they really have to perform. Otherwise, why did they choose to stay? If you wanted to go and watch Netflix, they could have done it with the money that they offered you. You chose to stay, so you get two effects, right? One of them is that you really select the people that are excited about working for you, and the other one is that now they have to justify it to themself.

[00:11:10] Adam Grant:
I think the selection part is, is really interesting in light of what's going on in the world of work right now, which is I'm seeing a lot of CEOs demanding that people come back to the office five days a week.

I think some of these people are trapped in a pre-COVID world in which it's impossible to have a relationship with someone that you don't see physically in the same office as you every day or believing, you know, despite the extensive evidence, that people can't be trusted to be productive if they're working hybrid.

But I think that some of these leaders are actually trying to do a version of what you're describing, which is they're demanding that people come back to the office, they wanna know who's committed, and they're hoping that people will weed themselves out. And that way I don't have to do layoffs. How plausible is that from what you're observing?

[00:11:55] Uri Gneezy:
So a few things about this. I think that, yeah, if I look at myself, I don't have to go to work. You don't have to go to work in the morning. We need to go to teach sometimes, but other than that, we can choose where to go. Pre-COVID, I used to go five days a week to the office because I didn't have a setup at home.

Now I made my garage my man cave. I have a good computer over here and I can stay home. So it's less attractive to go, and I kind of miss it. I miss the interaction with people. I think that to a great extent, that's what you said about asking people to come back to work is a signaling thing, right? So if you can be in other places and not come to work and you choose to be here and come to work, you're going to justify it.

If you drive to work and you're over there, you're going to be more friendly maybe with your coworkers, because otherwise, why are you here? Right? So if you just go in the morning, go into your cubicle, and do-doesn’t socialize with other people, why are you here?

So I do think that you'll get the selection that you said, that only people that are really serious, that really want to stay in this work will stay. And you also get the, “I'm going to try more when I'm there because otherwise, why am I doing this?”

[00:13:01] Adam Grant:
There's a risk though, isn't there, which is if the, the gap between expectations and reality gets too large, people have a difficult time justifying the behavior. If I get dragged back to the office and I persuade myself I'm really committed, and then the office is completely miserable, or it's a ghost town, then at some point that's not gonna be a sustainable narrative for me. Right?

[00:13:21] Uri Gneezy:
Right. So for the CEO to drag you to a miserable office, that's clearly a mistake. You don't want to do that, right? I think that it's all about coordination. What I said about the professors, my colleagues, we try to coordinate now on Monday, Tuesday, and Thursday, for example. And then when we are there, we understand that we are not going to be as productive in writing papers maybe, but we'll be just as productive in gossiping and discussing, which is an important part of what we are doing, and if the work environment is not going to be a pleasant one, I don't want to be there. And then you lose good people.

[00:13:54] Adam Grant:
I don't think I've ever heard an economist called gossiping productive before.

[00:13:58] Uri Gneezy:
Oh, that's the fun part of work.

[00:14:00] Adam Grant:
When I think about the literature on gossiping, I can think of two productive kinds of it. One is what my colleague Shimul Melwani studies, where when you gossip with someone, you're signaling that you trust them and that strengthens your bond.

The other is Matthew Feinberg, Robb Willer, and colleagues, what they call prosocial gossip, where I'm spreading negative reputational information about someone to warn you, “Uri, don’t trust this person. He's a selfish bastard. Watch out.” Does the gossip you consider productive fall into either of those buckets? Is there a third category we're missing?

[00:14:31] Uri Gneezy:
You asked me at the beginning, why do I study incentives? I think that gossip tells you a lot about the incentive. So people are telling you A, but actually it turns out that they care about B. I think that's part of gossip, and that's the part that I like the most, right, to really understand why are they doing this. I think that that's the part of gossip that they really like. There's of course the informational aspect, right? But for me, it's really more about understanding the hidden motives of people. Why are they doing what they're doing?

[00:14:56] Adam Grant:
Gossip is a window into implicit motives.

[00:14:58] Uri Gneezy:
Wow.

[00:14:58] Adam Grant:
Your next research program.

[00:15:00] Uri Gneezy:
Exactly. That sounds like a book title.

[00:15:02] Adam Grant:
And I think the gossip in it would have to be extra juicy. One of the other things I wanted to, to ask you about in the realm of incentives is the question of incentivizing pro-social behavior.
This is something I've been curious about as, as someone who spent a lot of my career studying pro-social behavior, it seems to me that it becomes especially complicated in the domain of saying, “We want you to care about others. We want you to act in a way that, that shows concern or compassion, or you know, maybe even some degree of altruism. And we're gonna, we're gonna try to reward that behavior or dangle a carrot or bring in a stick that's gonna shift you in that direction.” And I thought you had a very interesting and nuanced take on all this. So walk me through it.

[00:15:43] Uri Gneezy:
Right. So there are a couple of things about this. The first one is just straightforward giving you pro, what we call pro-social incentives. So my former student, Alec Simas, for example, has this nice paper in which it shows that I ask you to do something, to put some effort in it, and I pay you very little, it’s not going, it's not useful. If I pay you this very little by telling you if you'll do that, I'll give money to, I don't know, Make a Wish Foundation, that’s much more effective. So for small amounts, actually using charity is more effective.

However, if you, if you're going to really pay me lots of money, then I prefer to get it as a personal incentive. So, if you think about it, the personal incentive has a steep slope, whereas the pro-social incentive is kind of flat. I don't really care if you're going to give Make-a-Wish foundation a dollar or $10. It's about the same for me. I'm just getting a signal that I'm a good guy.

The Reason, a startup company over here that I work with that tries to do this, you need to walk 10,000 steps a day and then you get some reward for yourself that you can redeem in stores, but you also pay for a lunch for kids. And that seems to motivate people as well. Right? So you get two signals. I'm doing it because of the money and because I'm a nice guy. I like that kind of approach and it works on me.

[00:16:57] Adam Grant:
It’s always appealing when we can align goals that serve you personally and goals that benefit other people. Sometimes I've found in experiments that it's hard to put these two motivations together, in part because of the crowding out you were talking about, but also in part because of the signal around what is the nature of this interaction.

So years ago, some colleagues and I designed some experiments where we were trying to get people to donate to charity, and we randomly assigned some of them to basically be told, “This is gonna make you look good and feel good.” And others we told, “This is gonna do good.” And those two messages were about equally effective.

Then we tried combining the reasons, thinking two is better than one, and the donation rate dropped about in half. I was wrong. I assumed that if people are a little bit motivated to benefit themselves or others, they should be a lot motivated to benefit both. And yet, I think from a, you know, a mechanism standpoint, one of the things we learned was, um, that when you activated what seemed to many people to be competing reasons, because a lot of people have a hard time accepting the fact that we can both be self-concerned and other concerned at the same time, it raised their awareness that a persuasive attempt was occurring and all of a sudden, then, people put their guard up and said, “Wait a minute. You can't convince me to do this,” and that made them a little bit less receptive to the message that we were sending. Love your thoughts on how to overcome that, because I think in an ideal world, we could all over time gravitate toward actions that served others and ourselves.

[00:18:24] Uri Gneezy:
I distinguish between signaling to others and signaling to yourself. So signal, signaling to others basically shows, “Look, I'm a good guy. I'm doing something good.” Signaling to yourself, you can also convince yourself that you are good or less good of a person.

We ran an experiment with Ayelet Gneezy, my wife and Leif Nelson from Berkeley. We ran an experiment in which we went to a restaurant, a buffet restaurant, which was pay what you want. So basically people went there, usually for lunch, ate what they wanted, and then paid what they wanted, and usually, the waiter would come to them at the end of the meal, said, “Okay, as you know, it's pay what you want. You can choose how much to pay.” And people did pay. They paid about, if I remember correctly, about six euro on average. It was good enough.

Now they're getting two signals by doing this, they're signaling to the waiter how good they are, and they're signaling to themselves how good they are. But the signal to themself is not very strong because they think that they do it just not to look like a jerk to the waiter. “I want to impress the waiter or maybe the people next to me.”

So we had another treatment in which instead of paying directly to the waiter, you put the money in an envelope and you put the envelope in a box. No one sees it at the end, and you would imagine exactly like in your story, that signaling to others disappears. The waiter doesn't see it. I don't mind putting just, you know, one coin in there. No one will know. I can go and walk away, but because of that, the self-signaling is actually strongest because now, now I say, “Well, if I give money, it's just because I'm a nice guy. Why else would I give money? No one else will.”

And we saw that people gave a bit more when it was, when they put the money in an envelope. So I think that it's very similar to your story in which just the weakest treatment was actually the, got us the best results. So the combination of the two was detrimental because the signals got mixed and the value of the self-signaling went down.

[BREAK]

[00:20:10] Adam Grant:
I wanna go to a lightning round if you're up for it. And then I have a few more questions for you. So standard lightning round rules, looking for a word or a sentence? Not much more. And you can skip one if you wish.

[00:20:21] Uri Gneezy:
And if I skip two, what's the punishment?

[00:20:23] Adam Grant:
Based on everything I've learned from your research, I'm gonna be very disappointed in you, and you might be disappointed in yourself too.

[00:20:30] Uri Gneezy:
Okay. Okay. Okay. So I’ll try. I’ll do my best.

[00:20:31] Adam Grant:
What is the worst incentive you've ever seen?

[00:20:35] Uri Gneezy:
The worst is being on a motorcycle where the driver has a helmet and you don't, ‘cause the driver is not going to drive safe, and you're going to be in bad shape.

[00:20:45] Adam Grant:
Sold. What's the biggest reward or punishment mistake that you make as a parent?

[00:20:50] Uri Gneezy:
So I tell them they shouldn't lie and then they observe me lying. I tell them they shouldn't touch the phone, they see me touch the phone during driving. Those are the kind of things that we do.

[00:20:59] Adam Grant:
What is the worst career advice you've ever gotten?

[00:21:01] Uri Gneezy:
Just write good papers and everything else will be okay. Turns out that politics is important also in academia.

[00:21:08] Adam Grant:
Disappointing but true. What is something you've rethought lately?

[00:21:12] Uri Gneezy:
How happy I, I'll be even if the book will not sell. So now I'm focused on trying to sell the book and I told myself, look, I enjoyed writing it. It's a great thing to do, and I'll be happy no matter what happens, and then comes the time to sell it. And I understood that I fooled myself again.

[00:21:28] Adam Grant:
That’s why you keep writing books.

[00:21:29] Uri Gneezy:
Exactly. We are competitive.

[00:21:32] Adam Grant:
It’s a little bit like pregnancy. Right? I’ve constantly heard that the only reason people keep having children is they forget how hard it was to have their previous ones.

[00:21:39] Uri Gneezy:
Right. Right, right, right, right.

[00:21:40] Adam Grant:
One of the things that I've been thinking a lot about lately, which you also write about in Mixed Signals, is the timing of bonuses. So normally, we tangle bonuses kind of at the end of a task, like a pot of gold at the end of a rainbow. And I think you've been persuaded, as I have by some of the, the John List et. al work, suggesting that maybe we'd be better off giving people an upfront bonus before they've earned it. Talk to me about that.

[00:22:03] Uri Gneezy:
Right. So I think what you're referring to is loss aversion. So I worked with the online company that deals with selling cars and the, the president decided that he wants to give the annual bonus to the board at the beginning of the year in January, and then in December if they don't meet the targets, they have to pay it back.

Right? I think that that's a, that's a smart way of looking at things because we are much more attached to the money that we have. We use it already. We are happy about it, and then we register it as we got a bonus. And now if I won’t perform well, I'll have to lose it. So I think that it is a way to make your incentive go further.

[00:22:38] Adam Grant:
I always wonder about the side effect there though, which is I think empirically, right? Even with teachers, when I think the data show that when you give them a bonus upfront, they're more likely to earn it. However, those who don't, as a manager, you feel like a huge jerk to take away that bonus at that point. And I wonder about the damage that could create from a relationship and retention standpoint.

[00:23:02] Uri Gneezy:
It's not a good day when you have to, to tell your teacher or your director, “Please, please write a check back for a significant portion of your, of your salary,” and that teacher is not going to be happy in general.

Also, imagine that I give you the, the option to take the money now and pay it back if you are, if you don't perform or not. I think that most people would take the, the option to get the money now simply because that also signals what you think about your success. What's the chance that you'll be successful?

If I say, “No, no, no, I don't want it,” basically I'm telling you, I probably not going to make your goal, right? So I don't want to do that. Might be more motivating, but that's not necessarily what you want to do, right? There are many ways to motivate people to do better, but we don't want to do them.

Incentive is not the only thing that you should care about. So in this case it could be retention. It could be that you lose teacher that will go to other places in which the bonuses are paid at the end, for example.

[00:23:54] Adam Grant:
Or perhaps even go somewhere that offers a higher salary where you don't have to feel like your performance—

[00:23:59] Uri Gneezy:
Right.

[00:23:59] Adam Grant:
—is going to determine your pay at all.

[00:24:01] Uri Gneezy:
Yes.

[00:24:02] Adam Grant:
Fascinating. Okay. Speaking of teachers, I was intrigued by your discussion of why Americans are underperforming on standardized tests. I remember reading a few years ago about the PISA test, which compares high schoolers around the world on math, reading, and science skills, and relative to many Western European and Asian countries, it looks like Americans are doing pretty poorly. And you say not so fast.

[00:24:26] Uri Gneezy:
Right.

[00:24:26] Adam Grant:
Maybe we shouldn't be too, too worried about Americans.

[00:24:29] Uri Gneezy:
Right. So basically we need to, you need to have some background about this. It's called a low-stake test, which means that you, as the, the kid who takes it, you don't have to, you don't have much of a consequence.

The, the way it's run is they pick random schools in, say, the US. And they go to 15-year-olds. Tell them, “Okay, please sit down in the coming three hours. We want you to do all these math, science, and reading tests and please pay a lot of attention. It's really important. And just FYI, you will never know how well you did. Your teachers will never know. Your school will never know.”

If you would've done it to me today, I would've told you, you know, thank you and would just not do the, the task. Why would I do it. At fifteen. Then you get the results and you see that the US is ranked somewhere in the mid-thirties in math, for example, despite of spending so much money on it. And other places like Finland are at the top and the question is “Why?”

And what we found really wrong about this discussion is that the assumption is that it's only the kids' ability. We said no; it has two elements. The ability and their willingness to sit down and actually spend three hours helping you, which might be an important trait in itself but is a very different one than what you are concluding, right? It's not about math.

So what we did, we went to China—Shanghai—which scored the first in math in the, in PISA and to the US and we went to few schools and we let them do the test first. We had a short version of it, and we saw that indeed the, the Chinese were much better than the Americans.

But then we told them, “Here, you need to answer 25 questions.” We used loss aversion that we discussed before. “Here's $25. If you answer all the questions correctly, you keep the $25. For every mistake that you make, we're going to take a dollar from you.” Now, the American kids were also motivated, right? They were really motivated.

They really want to do, and what we found is that the Chinese kid didn't do better than before. Whether you pay them or not, it didn't matter probably because they already put a lot of effort in it. The American kids, on the other end, really put effort now, and there was a huge jump in their performance.

So maybe the conclusion is not necessarily that the American kids are bad at math, but that they don't have this kind of motivation to actually perform well on low-stake tests. And we need to be very careful when we are concluding about ability from these tests.

[00:26:51] Adam Grant:
I don't think we talk enough about the role of motivation in test performance. One of the things I've been intrigued by in psychology in the last few years, I remember reading an article by Thomas Hess synthesizing a whole bunch of evidence that you can see a similar problem with cognitive ability testing among older adults.

So there's a common finding, right, that as you age, your IQ drops. Well, did anybody ever consider the possibility that maybe older adults are less motivated to ace IQ tests than younger people? In some cases, they already know they're smart or they're already comfortable with their level of intelligence. In other cases, they're worried that maybe their intelligence is dropping, so they self-handicap. They don't try that hard. In either case, they don't care enough to do their best. And it turns out that if you raise the motivation level of older adults, you also see a spike, much like you did with these indifferent American high school students.

I like the idea of low-stakes testing in general because it, it takes the pressure off. It eliminates some of the, the stereotype threat problems that we talked about recently on the show with Claude Steel that can disproportionately depress the performance of underrepresented groups. But on the other hand, if the stakes are too low, Then a lot of people just aren't gonna care and you don't get any sense of their aptitude or their expertise. Is there a best of both worlds here?

[00:28:04] Uri Gneezy:
Yes. So here's an example. You mentioned that it might affect different populations differently. There is evidence that men are doing better when the pressure goes up than women on these tests. So one of the pressures that you get on this test, which is not clear why, is time.

So get, say, a minute per answer, that puts time pressure on you and it doesn’t tell me how well you're doing, how well you understand math. It tells me that you're really good under pressure. So, if I want to hire you to recruit you as a fighter pilot, that's really important. Performing under pressure. If I want to know whether you're going to do well in college, why do I need to do that?

So imagine, and that's what we are trying to do, now, imagine that you can run an experiment in which you give them the standard times and then you give all of them the extended time, a minute and a half to do the test. You might get very different results and it's going to be much more indicative if we can tie it later on to how successful they are in their studies.

So that's the kind of thought of thinking, I think, that can really improve what we have. So not eliminate the test, but make them more about what you're trying to get, less about the noise around it.

[00:29:14] Adam Grant:
You brought up differences between men and women and I wanted to, to make sure we talk about this before we wrap up. Your research on gender differences in competition is riveting. You did something that very few social scientists have thought to do, let alone been able to get access to do, which is you said, “What if we go to a matrilineal society where women are actually in positions of power?”

[00:29:36] Uri Gneezy:
Matrilineal societies are not the opposite of patriarchal society. It’s, uh, men still control the village, for example. But, at the household, women are make all the decisions, so they own the real estate. Only women are allowed to hold real estate. So a man lives either with his mother, his sister, or his wife. They control the money, so they have much more control over what they have.

And we wanted to see whether over there we'll find the same differences that we see in patriarchal societies like most of the societies in the world. And what we found, we measured competitiveness over there. I don't want to get too much into the details, but we try to measure competitiveness. When you do it in San Diego, New York, Tel Aviv, Paris, anywhere in the world that I'm aware of, you find that men are much more competitive than women.

When we did it with this society, we saw that the women in this society were a bit more competitive, say the same as the men. And it didn't come from the men being less competitive, it just, the women became more competitive. So the gender difference basically in competitiveness disappeared with culture.

The way we are raised is important. So I think that the advice, you know, lean in, for example, maybe in the short run, if my daughter needs my advice, I'll tell her, “Yeah, you need to be, uh, more like a man,” but as organization, as a society, we should really make the workplace the best the workplace could, could be, and not the workplace that favors men over women.

[00:30:56] Adam Grant:
Where do you find these matrilineal societies?

[00:30:57] Uri Gneezy:
The society was in northeast India. They work in the rice field. It's about a million people that they're called Khasi, and they, they're separated from the world in a sense, in their villages.

[00:31:08] Adam Grant:
And how do you measure competitiveness? I know you go far beyond self-report and you actually look at behavior.

[00:31:14] Uri Gneezy:
We told them, “Here's a bucket, it's 10 feet away from you. You get 10 balls. You need to throw the ball into the bucket. For every success that you have, we’ll pay you a dollar.” It wasn't a dollar, but let's say that it's a dollar.

Okay, so that's, that's one group. And then we can see how they do. Another group, we tell 'em it's a winner take all. So you're going to compete with another person that you don't see. If you do more than the other person, you'll get $3 per success, but if not, you'll get $0. If it's a tie, we're going to split it between you.

Okay. So those are two different incentives. And now we can have: do people actually choose which incentive do they prefer? Do you prefer the competitive winner take all? So if you'll do better than the other person, you'll get three times, $3 per success? Or you prefer to be paid, uh, per uh, success. And we see that in, when we do it in anywhere, basically, apart from this society, we see that men are much more likely to choose to compete. However, if you do it in the matrilineal society, you see that men and women are just as likely to choose the winner take all option.

[00:32:20] Adam Grant:
I remember reading some research recently by Selin Kesibir and colleagues showing that men and women were actually equally aware of the downsides of competition, but that men were more likely to believe in the upsides of it.

And I wonder if that's part of the psychology of what shifts in a matrilineal society is that women all of a sudden experience some benefits of competing and realize the world doesn't have to be zero-sum. It doesn't mean that, you know, if I win everyone loses all the time, but sometimes competition actually allows me to work harder or smarter or learn something that we didn't know before.

[00:32:53] Uri Gneezy:
I think that's absolutely right, and competitiveness is really related to risk-taking, also. With Khasi, the matrilineal society over there, you know, you’re used to taking risk because you go to the market to sell your rice or whatever you're selling.

Sell tomatoes. You're used to taking risk ‘cause you know you need to decide how much to take with you, how to price them. Those are all decisions that involve risk, involve competitiveness, and you understand that sometimes you're going to lose. It's fine. Hopefully, in the long run you'll come up on the good side. So I think that you learn that it's okay to lose. That's a good point.

[00:33:27] Adam Grant:
It's a lesson we all need to learn. One of the things I've started to notice as I've been doing more regular podcasts is the conversations can be one-sided ‘cause I'm asking all the questions. I've started turning it over to the guest and asking if you have a question for me.

[00:33:41] Uri Gneezy:
What motivates you? Why are you having this operation? You have good life as a professor. Why do you need to have all this production of podcasts, for example? It's a lot of work. It seems like a lot of work.

[00:33:50] Adam Grant:
I love the fact that I get to talk to interesting people and call it part of my job. I've been in a lot of conversations over the last few years where I've thought, “Oh, I wish, I wish other people could, you know, could join in on this. And I would love to make it more accessible.”

And originally for me, podcasting was a new medium to share what I was learning as I was learning it, as opposed to after I learned it. And increasingly, I feel like the more that people can be a fly on the wall for an exciting conversation, the more ideas we can bring into the world.

And that's ultimately why I became a professor. I think it's why most of us get into this enterprise, right, is we love knowledge, we're excited to share ideas, and the, the more vehicles we have for doing that, the better.

[00:34:32] Uri Gneezy:
Right, but that's, that's a bit different, right? Because you're helping other people. Shorter ideas. Right? So that's a different thing than what we're usually doing and—

[00:34:42] Adam Grant:
Oh, I’m not helping you. I'm here to learn.

[00:34:43] Uri Gneezy:
Ah, good, good, good.

[00:34:44] Adam Grant:
If you, if you get a benefit that's, uh, that’s an accident.

[00:34:46] Uri Gneezy:
I do. I do. No, but it's, uh, thank you for doing this. I'm happy. I don't, because I think that I would be too stressed.

[00:34:53] Adam Grant:
No, I mean, I think, I, I actually think that so much of what happens in a great podcast episode is what you were saying you missed about coming into the office? Right. I guess some people, they go to the opera or they go to an art museum. For me, a conversation like this is where I get the goosebumps.

[00:35:12] Uri Gneezy:
I’m with you.

[00:35:13] Adam Grant:
Well, thank you Uri. This was great fun. Pleasure to meet you.

[00:35:16] Uri Gneezy:
Same here.

[00:35:21] Adam Grant:
When we design rewards and punishments, we spend a lot of time thinking about the result we're trying to motivate. We need to be at least as thoughtful around the relationship that we're trying to build because every incentive sends a message. It can tell people that they're just a means to an end, or it can tell people that we care about them.

ReThinking is hosted by me, Adam Grant, and produced by TED with Cosmic Standard. Our team includes Colin Helms, Eliza Smith, Jacob Winik, Aja Simpson, Samiah Adams, Michelle Quint, BanBan Cheng, Hannah Kingsley-Ma, Julia Dickerson, and Whitney Pennington-Rodgers. This episode was produced and mixed by Cosmic Standard. Original Music by Hansdale Hsu and Allison Leyton-Brown.

There's so few situations in life where success is dependent on can you marshal the right answer to a complex problem in less than a minute. Right? Most of life is “Can you figure out the answer, ever?”

[00:36:20] Uri Gneezy:
The lighting round sounded a bit like that, but other than that it’s…

[00:36:24] Adam Grant:
Are you saying I should have given you more time for the lightning round?

[00:36:26] Uri Gneezy:
Well, I'm saying that maybe I'm happy that I'm not a fighter pilot.

[00:36:31] Adam Grant:
That’s fair.