Wednesday, June 17, 2009

Incentives, Disincentives and Spoiled Brat Syndrome

It is stupendously politically incorrect to note that humans respond to both incentives/praise and disincentives/negative consequences.

There is a great divide in the U.S. economy which will only be bridged by the coming insolvency of the Federal and state governments: those who can be fired/laid off and those who still feel entitled to their job regardless of their output.

One of my carpentry masters was an African-American gent from New Orleans. Back in the early 1970s when I first began working for him and his partner (a Caucasian gent), he told me that how he'd found work in tough times was to approach the foreman of a construction project, point to a worker on the site and say that he could do more work than that guy.

The foreman would give him a once-over and put him to work. The next day, the other guy would be gone and my boss would have his job.

That's called getting and holding a job based on output and nothing else.

Now we have a culture and economy based on Spoiled Brat Syndrome: only incentives and praise are allowed as motivators. One of my correspondents emailed me this reflection of Corporate America management practice:

We are providing management training for our management team and there are four areas that motivate most people:

1. Learning and/or teaching
2. Being creative and/or problem solving
3. Helping others and/or making a contribution
4. Taking risks.

I'm all for positive motivation, but if we read between the lines, here is what's being communicated: since we can't fire you or motivate you with disincentives then we have to offer happy-happy Spoiled Brat Syndrome "positive motivators" to get you to perform.

Every parent knows the ideological "religion" in education now is positive praise, gold stars for showing up, grade inflation (every kid is a genius and deserves an A), etc.

Yet strangely enough, studies have shown that people habituate very quickly to constant praise and regular pay raises and that such positive reinforcement/incentives quickly lose their motivational effectiveness. (Unpredictable "out of the blue" bonuses work far better than scheduled raises.)

Instead, an entitlement attitude takes hold in which pay raises, additional benefits, constant praise and an A for mediocre results are expected, and any reversal is met with resentment and a profound sense of disenchantment: what was owed/deserved was unfairly withheld.

That is, Spoiled Brat Syndrome, in which said Spoiled Brat whines and cries if he doesn't get a new toy every time Mommy takes him into a store.

There are many reasons for the ascendency of Spoiled Brat Syndrome, but one is the notion that a job or entitlement is deserved by reason of one's existence. Perhaps there are faint traces of industrial unionism remaining from much different times, when laborers toiled in low-skill factory positions which were interchangeable--the next guy could tighten the bolt as well as you could, and so a union was necessary to protect the laborers from outright exploitation.

But now the union movement has taken over white-collar/service sectors where output is highly correlated to an individual's training, motivation, attitude, etc. Lazy workers receive the same pay and benefits as highly productive workers, so the incentives to be productive are weakened to near-zero. Disincentives are simply not allowed; workers can be censured or punished for non-politically-correct language or behavior, but not for low productivity/output.

In "protected" fiefdoms, the worker at risk of losing their job due to incompetence, laziness, low productivity/output knows to file a "stress claim" via workers compensation so they can get paid to stay home, and then file a grievance for unlawful termination in the hopes that a fat legal settlement will ease the pain of being laid off. (This is known as "gaming the system.")

Please don't say it isn't so; these accounts come first-hand.

Circumstances are slowly changing because neither local government nor corporate America can print money. Thus as tax revenues and sales plummet, eventually labor costs (fully 3/4 of all local government expenses) have to be trimmed, regardless of union rules. Unfortunately, the rules usually favor seniority over competence or productivity, so once again the laziest and least productive have every motivation to cling on.

I am well aware that simply telling the introductory story will draw accusations of this being a rant. In other words, simply noting that jobs once went to people based solely on their productivity and output rather than on their other attributes, and that not being able or willing to match (or better) others' output would cost you your job, is verboten. Only incentives are allowed now in every sector above field hand. Disincentives are poisonously politically incorrect.

And this is how you get a culture and economy drenched in Spoiled Brat Syndrome. Nothing bad is going to happen to me, so why bother making my best effort? I'm going to get what's coming to me regardless.

Over the past 25 years I have from time to time managed rental properties as a way of leveraging my DIY skills (not that high, but high enough to repair most minor things). I noticed that when the owners attempted to "reward" responsible tenants by returning their security deposit a few days before they actually vacate, the apartments were generally left an untidy mess.

When tenants, excellent and mediocre alike, get the same letter stipulating that the deposit will only be returned in full after an inspection which follows a detailed checklist (an objective metric), then magically, the good tenants leave their units spotless and mediocre tenants either make a good-faith effort to clean up (especially pathetic for many bachelors) or apologetically confess that they know the place is a mess and they won't be getting their deposits back.

In other words, disincentives can be more effective than incentives. That is so wildly un-PC that it truly is "that which cannot be spoken, but only whispered."

The great divide between entitlements (which can't possibly be paid at current levels past about 2014) and "guaranteed jobs" and the real world is about to be bridged. As corporations shrink relentlessly and cities and counties declare bankruptcy, dissolving unaffordable union contracts and pension entitlements, then managers may well find that having hungry and motivated applicants claiming they can do the job better and faster will improve employee output far more effectively than another round of corporate-speak and "facilitators" spouting a threadbare "rah-rah, go team!" line of "motivation."

Yes, I have been "securely" (heh) on the fringes of the U.S. economy since 1971. And yes, I understand many managers/bosses are abusive, dictatorial and unfair and that many workplaces are hellholes. The only boss you can't fault is yourself. When you're your own boss, then your focus is on providing better value than others to your customers/clients, and if there is no demand for your goods or services then you switch to some good or service which is in demand.

I also know our various financial "rights" have been funded by borrowing trillions of dollars from overseas, and our stupendous consumption of tangible goods has been financed by the exchange of paper (dollars) for tangible goods produced overseas.

This trade is not a "right," it is a con. Both cons (borrowing trillions which we can never pay back in equivalent purchasing power, and exchanging paper for tangible goods) will blow up within a year, and our various "rights" will lose meaning as we will face the responsibility of living within our means.

I also know various uninformed voices believe we can satisfy our financial "rights" by "taxing the rich." So let's see how that works. Let's not fool around with taxes; let's just seize $12 trillion from the Plutocracy which owns some 2/3 of the productive wealth of the nation. All that $12 trillion does is back up what the Fed and Treasury have guaranteed/promised/borrowed to bail out the financial sector.

Now let's pay for the $2 trillion annual deficits for another 6 years (until 2015) by seizing another $12 trillion from what's left of the Power Elite's holdings. (If all asset classes other than gold fall in value in the coming years, as I consider inevitable, then our total national wealth will drop from about $48 trillion to some much lower total. Recall it's already declined $13 trillion in the past 18 months.)

So in 6 years we will have seized $24 trillion from "the richest of the rich," the majority of their wealth, and then what will we use to pay the next 6 years of deficits? What exactly have we solved by seizing $24 trillion in wealth to cover a bailout of the rentier-finance sector and a mere 6 years of Federal deficit?

The twin cons are up. The rest of the world has grown tired of the cons: lending us trillions which will never be paid back in equivalent purchasing power, and trading tangible goods and assets for paper which might revert to its intrinsic value, zero.

I think Douglas MacArthur got it right: "There is no security on this earth; there is only opportunity."

That is about as far from Spoiled Brat Syndrome as you can get.

A few classics in case you missed them:

The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century James Howard Kunstler

Depletion and Abundance: Life on the New Home Front Sharon Astyk

The Future of Life E.O. Wilson

Globalization and Its Discontents Joseph Stiglitz

On Peak Oil:

Beyond Oil: The View from Hubbert's Peak

The Party's Over: Oil, War and the Fate of Industrial Societies

The End of Oil: On the Edge of a Perilous New World

Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy

On chemical/toxins overload:

Our Stolen Future: How We Are Threatening Our Fertility, Intelligence and Survival

On the demographic time bomb about to explode:

Fewer: How the New Demography of Depopulation Will Shape Our Future

The Coming Generational Storm: What You Need to Know about America's Economic Future

On collapse of advanced civilization:

Collapse: How Societies Choose to Fail or Succeed (Jared Diamond)

The Collapse of Complex Societies

A realistic appraisal of alternative energy:

Sustainable Energy - Without the Hot Air

Our previous lists of hot reading and viewing can be found at Books and Films.

Of Two Minds is now available via Kindle: Of Two Minds blog-Kindle

Thank you, Richard S. ($5), for your much-appreciated generous contribution to this site. I am greatly honored by your support and readership.

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