In the business climate of the United States today there exists a fundamental problem. Appearances and sociality held indicators of “success” are creating incentive structures that encourage, at best, emulation and at worse destructive working habits. Take for instance the prevailing wisdoms around interviews. Browse online and you will find an abundance of information on how to dress, how to use ideal body language that signals confidence and how to answer the cliché questions like, “What is your greatest weakness?” or “Where do you see yourself in 5 years?”. While these questions might tease out some modicum of value in certain cases, they are far less compelling than a deep dive into an individual’s skill set and passion for the position you are recruiting for. Similarly, individuals are coaxed by society into buying dramatically price hiked watches, suits and cars, despite the fact that the aggregate of psychological research has repeatedly found individuals are happier when they invest those same funds into experiences. The pitfalls of ostentation seep into every arena from the corporate world to academia.

 

So that raises two primary questions.

 

  1. Why do we focus where we do?
  2. How do we change the current paradigm?

 

To answer the first question lets delve into an example of a used car salesman. He is paid minimum wage and the bulk of his compensation is made from commission. His/Her employer makes the fairly commonplace assumption that this commission structure will reward the best employees, weed out the weakest and tie their performance to their results. The premise sounds good in theory but in reality what happens is a cutthroat work environment that is misaligned with the companies goals. Because the car salesman is incentivized to maximize his sales and thus take home the most money for this family, this aim trumps everything else. If he sees a co-worker’s client struggling when his colleague isn’t around, why should he help? The contact is his colleagues and bears no direct benefit to him. In fact, his numbers may look even BETTER relatively if his colleagues doesn’t close the sale. Often times the net of this type of system is one in which the incentives of the salesmen are to maximize his appearance of adding value (getting his best quarterly results) versus actually maximizing what is best for the company (making sure his department hits record high sales).

This problem with incentives is perhaps even more accentuated in higher education. Success in graduate school programs is often measured not by the ability of students to generate innovative ideas but instead by the volume of papers they are able to get published. Because of this, higher education is riddled with bad science and fudged test results, as students clamor to cut out the outliers or cofounding variables in their work in order to make their results appear more seminal.

The aforementioned examples illustrate succinct cases of incentive structures being misaligned with optimum value production.  It is important to note, however, that most of the deleterious affects of this paradigm are subtler. Why do we wear suits? Why do we buy diamond rings? Why do stick to a convergent thinking style of education that rewards rote memorization above all else? The answer is because it is easy. It is easy to stay within established norms because you have a clear idea of what success looks like. You believe that by wearing a nice suit you will receive more respect or by getting good marks you will be promised a successful career. Society has attempted to boil down complex realities into easily digestible, and replicable imperatives.

So the answer to the first question is that we focus on the areas that we do because society has created an incentive structures that drives us in that direction. There is comfort in conformity. But if we want to change the system we have to be proactive about identifying what really matters.

When we build teams as employers we must focus on nurturing employees that share a vision with what the company wants to achieve. We need to create an environment in sales where creating a larger overall pie trumps individuals being lauded for claiming a larger share of a smaller one. In marketing we need to disseminate information that genuinely helps our clients in a given area, rather than marketing geared to push people towards a buy decision. We need to realize that marketing and sales are important but fundamentally it is product quality that drives long-term industry disruption and that should be the cornerstone of any companies focus.

When giving a speech at the Stanford business school, billionaire venture capitalist Vinod Khosla stated that the world’s most groundbreaking innovations happen at the “edges”.  In order to capitalize on these innovations, companies must seek to create incentive structures that reward fringe thinking and challenge conventional wisdoms.

At the end of the day, what differentiates the greatest innovators and builders from the crowds is that them and their teams are singularly focused on the idea of generating maximum value for their clients and are not mired by the pitfalls of feigning value for prestige or advancement.

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