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Focusing on What We Can Control:
Intrinsic Motivation

 

By Gayle Colman

At a time in our evolution, when the markets are behaving irrationally (BTW, they have always) and most of us get triggered in fears for our future when we see our portfolio value drop, it is imperative that we continue to look beyond the traditional financial metrics for value in our investment strategy. The work of Dan Ariely on human capital and cultural motivation leads us to new ways of seeing and acting. His Ted Talk What makes us feel good about our work? has over 7 million hits.

For the past six years his company, Irrational Capital, has been studying companies that value human motivation and incorporate practices to benefit employees that foster what truly matters for their most valuable asset: people. Large mutual fund companies who collaborate with Mr. Ariely believe that if this information can be quantified, better investment choices are possible for their investment offerings.

In a recent webinar, Mr. Ariely discussed his work and the results on two studies he conducted to gather data: 1) with a call center for the CEO of a hotel chain and 2) with an Intel production facility. The findings he shared were helpful yet not a big surprise.

To motivate employees at the call center, the company provided weekly bonuses for performance. When Mr. Ariely arrived, he found that the same people were getting the weekly bonuses which meant that there was no change in behavior. Mr. Ariely asked permission to give out the bonuses for six months; the bonuses were randomly given which allowed him to check many permeations. At the end of the period, he asked, was the company better off giving bonuses to high performers or low performers?

The results indicated that when giving to high performers, there was not a big difference. If we are motivated to perform, such as a singer who has a beautiful voice, we will continue to perform. A singer is not going to stop singing well. But, when giving bonuses to the low performers, there was a significant difference. The low performer never believed they could reach a bonus, so they never tried. When they started to receive bonuses, their motivation shifted to improve.

In the second study with the production facility, on specific days the company offered money, pizza, a compliment by text or nothing. The results showed that the days bonuses were promised, performance went up. But the following days, performance dropped significantly. Providing pizza created a slightly better performance than money. But paying compliments, appreciating the work of the employee, had the most effect on sustaining performance.

Mr. Ariely segments motivation into views: 1) extrinsic (pizza, money) and 2) intrinsic (feeling good) and stated the obvious: extrinsic motivation is not forward-looking, which means that it can’t be sustaining. But intrinsic motivation—goodwill and energy that lives and breathes in our human vessel—sustains motivation.

Appreciation, acknowledgement, compliments—simple (maybe not easy) actions to engage daily, are the most effective way to enliven and motivate people. People who feel appreciated will be motivated in their work.

Returning to investing in human capital and how company performance and value is primarily, if not totally, measured by financial metrics on their financial reporting, we believe in both strong financials and evolutionary applications. Our future rests on human capital and the ability of our corporations to shift practices and policies that value the people who energize their existence. This is where value will meet humanity.

Until the above makes strides, Mr. Ariely suggests in times when our markets are fluctuating and fear is escalating, focus on what you can control: 1) manage your spending, 2) retain a long-term strategy and view, 3) enact daily joys.

One way we choose to assist you with any of the above is by providing curiosity and generous reflection in our connections. When we offer a reflection question, grab your journal, (a piece of paper or the voice memos on your phone) and take a moment to answer with your truth.

When appropriate we help you manage your spending.
Investment integrity services sustain a long-term view and strategy.
Daily joy? Hmmm, we are so curious. Tell us, what’s your joy today?

WONDER QUESTIONS:

• What reliably brings you joy? And what takes you out of joy?
• How do your intrinsic motivations show up in your work, relationships, and behavior?
• How do you feel when intrinsic motivation is flowing in your life?

 

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November Market Update

 

All of 2022, the broader market has been shaded by dark clouds. Growth has slowed since the first optimistic movements out of the pandemic. High inflation has produced high prices while we have waited in political uncertainty.

The end of the year brings a potential inflection point. In November, both the CPI (consumer price index) and the PPI (producer price index) presented downward movement. Last Thursday Nov. 10, the market rallied as the consumer numbers came in lower than expected, revealing a potential light at the end of the inflation tunnel. Tuesday Nov. 15 brought in more great news as the producer numbers came in strong. Service inflation came down for the first time since November 2020.

The CPI (consumer price index) is usually more of a lagging indicator and the PPI (producer price index) a leading indicator. Both showing weakness in inflation means the market can breathe a sigh of relief for the moment—as we await the next read to see if the trend continues or if this was a fluke.

 

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Congratulations to me!
I earned the FPQP®

 

by Emily Thomas

Speaking of intrinsic and extrinsic motivation (this applies to both), I am proud to announce that I have completed the requirements to be conferred with the Financial Paraplanner Qualified Professional™ designation from the Kaplan College for Financial Planning. During the past four months I studied twelve modules, covering the basics of financial planning principles, from cash and debt management, to insurance, to investments, to retirement planning and social security, to taxes, and estate planning.

I was surprised how much interest I found in the topics (except life insurance, ugh! Glad we have our resident expert David Manteau to sort those choices for you!) I especially enjoyed the Basics of Insurance section, analyzing the techniques and rules for risk management, and learning how to assess insurable risks. It struck me that insurance is based on a group need. Joining together with others who have a similar need for protection allows an agreement to be made with an insurance company who will accept the transfer of risk, based on the law of large numbers. It’s a tangible way that individuals share the burden of personal risk and demonstrate that we’re all in this together.

Learning to use a financial calculator to calculate the time value of money brought me back to the satisfying straightforwardness of math class and coming up with the measurable “right” answer. Throughout the study I was inspired by principles directly applicable to my personal (newly married) life: discovering the potential uses for homeowners insurance, strengthened attention for health insurance planning, the importance of estate documents, and what to expect for social security, for example.

What drew me to the program was the opportunity to gain more traction with the work of Colman Knight and what we think about in our guidance for clients. Although I don’t expect to engage directly in pithy financial planning, my motivation is to offer effective support for all of the work of Colman Knight. Stronger insight of the functions of financial tools gives me leverage to contribute with more targeted aptitude. Colman Knight strives to reduce tension and increase clarity in our clients’ lives, so that you are supported to pursue what is most meaningful and satisfying to you. Deepening my understanding of financial concepts builds the capacity of the whole of Colman Knight to fulfill that mission.