When I try to think through some phenomenon or a policy proposal I like to look for feedback loops. Perhaps this is a result of my background, while I’m not an engineer I have been exposed to so much electronics that I sometimes slip into thinking that the world is like an electronic circuit. This is not as bad as it seems, one just needs to remember that a lot of work has been done to make electronic components behave like their theoretical counterparts. Human behavior is usually quite complex and careful consideration is needed when decisions are made based on a simplified model.
A definition for feedback can be found from wikipedia. As an example: picture a large dam made of sand. As long as the water level stays low enough the water stays in the reservoir, but if even a small trickle starts, it takes some of the sand with it and makes a better channel for the water. This in turn makes the trickle larger, which takes more sand with it. Pretty soon there is a ravine and the water is rushing out. This is positive feedback, the flow is amplified by the feedback (i.e. erosion of the channel). Reaction of the system to a change is to change the system more to the direction of the change. In negative feedback the feedback signal has an opposite polarity compared to the change. This can result in a system that stays close to a value as it tends to return to it after a disturbance.
Money can act as a feedback mechanism. You get paid, you show up at work and usually do what you are told to do. You are promised a bonus and you work hard to earn it. Sounds fairly simple and foolproof. But is it?
I have been lucky enough to work in organizations filled with experts and as is sometimes the case in such organizations, my boss has usually known much less about what I have been doing than I do. In this situation I find it difficult to put much emphasis on verbal praise, after all my boss didn’t really know how hard it was to achieve my targets. So the one feedback mechanism available has been money. Targets are set, I exceed them and I get a fat bonus. Everybody is happy.
But after a few years I realised that I seldom thought about the extra reward when I was working. When extra money was the sole motivator the value of my contributions were “perhaps” smaller compared to situations where I was internally motivated. The feedback loop didn’t close and in practice the money was wasted. This excellent story and this fine clip seem to explain why. According to the video if a task is difficult money is a bad motivator. Apparently this has been proven by many experiments. I blame someone for not telling me.