Back to Business

On Friday, I attended the Rotman School of Management’s Life-Long Learning Conference for Leaders. The conference was titled “Get Your Business Back to Reality” and focused on how the business world needs to change in light of the 2008 meltdown of the mortgage-backed securities market and resultant financial crash.

I registered for the conference primarily because I wanted to hear Daniel Pink talk about his book, Drive: The Surprising Truth About What Motivates Us. Also, with my Alumni rate, it was an inexpensive way to spend the day at the new Ritz-Carlton (the not-so-surprising truth.)

Pink is a very engaging speaker. His talk touched on how the current corporate rewards system fed some of the behaviours that led to the financial crisis. He emphasized the need to move away from the widely-held orthodoxy that money is the prime motivator, since research proves otherwise. Financial reward, while appropriate for gaining short-term compliance in completing routine tasks, is not a long-term driver and instead simply invites people to game the system in an attempt to increase personal gain. According to Pink, in order to foster the type of employee engagement that creates long-term growth, people must have a sense of autonomy (the ability to perform a task in their own way,) mastery (the ability to gain competence in a task,) and purpose (the knowledge that a job contributes to a greater good.) These three factors lead to what Pink refers to as intrinsic motivation, a form of motivation that is more effective over the long term and feeds the creative process so needed in business today.

I witnessed intrinsic motivation this weekend when I was on the driving range. None of my fellow golfers were being paid to practice: in fact, we were all paying for the privilege. And yet, everyone there was focused and giving it their best effort because the practice gave us that sense of autonomy (we chose to be there and could practice however we wanted,) mastery (if we continued to practice, we could improve our swing,) and purpose (the more we practiced, the less humiliated we’d be off the tee.) Pink’s research indicated that paying us likely would have created a disincentive to work on our skills: we might only practice as long as we were being paid (and being observed by those paying) and we might not put in our best effort. Pink then talked about companies that are trying to bring a sense of autonomy, mastery, and purpose to the work world in order to bring out the best in employees. Most notable was  Google’s highly regarded “20% time” (developers spend 20% of their week working on whatever projects they like in whatever teams they choose) that has led to the creation of Google News and gmail, two of Google’s most innovative products. If we want to bring out the best business thinking, we must engage the fox, not simply slip him a fifty.

After Pink’s talk, which was fairly broad in its appeal, the day became much more focused on the financial markets. Speakers included: Thomson Reuters Digital’s Chrystia Freeland, Harvard Business Review’s Adi Ignatius, Rotman’s Roger Martin, CBC’s Amanda Lang, The New York Times’s Joe Nocera, FT’s Gillian Tett, and Rotman’s Richard Florida (whose speech I had to miss.) Now, it’s hard to come across as anti-Capitalism when you are speaking in a luxurious ballroom (the chandeliers alone were a tribute to the profit motive) to a crowd of 450 business school grads, most of whom were chattering enthusiastically about the new Conservative majority government at the break, but there was a decidedly critical tone. All of the speakers took aim at our current, so-called free market system (the lack of transparency prevents it from being truly free.) There is a real sense that the current focus on generating escalating profits has undermined the fundamentals of our capital markets (access to capital should lead to economic growth, after all…) and contributed to a proliferation of hedge funds who take bets against the market, investment banks who pit unwitting clients against one another as they play both sides of a deal, pension funds who allow themselves to be counterparties in transactions that ultimately harm their client base, and CEOs who focus on share price at the expense of long-term success. Many of the speakers pointed out that the system has done very little self-monitoring to ensure that a similar crisis does not recur and then discussed possible fixes, given that the whole “love of money” thing is not likely  to go away any time soon.

Roger Martin offered one of the more interesting suggestions, looking to the NFL for guidance (an idea he explores more fully in his new book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL.)  He discussed how NFL players are not allowed to bet on the football games since they could — in theory — profit by fixing the game and playing poorly. This is, of course, in direct contrast to S&P 500 companies that encourage and often insist that their senior managers bet on the very game they control by granting stock and stock options. Martin asks why the NFL seems more concerned than Wall Street does about things like the principal-agent problem and moral hazard. Not a bad question…

Gillian Tett, the razor-sharp U.S. Managing Editor of the FT and author of Fool’s Gold: The Inside Story of J. P. Morgan, is a social anthropologist by education and urged us to explore the idea of social cohesion: the notion that societies are more stable when pain is more evenly distributed. In other words, in a world where S&P 500 CEOs make 222 times more than their average worker, senior executives are relatively sheltered from the blowback of an economic downturn to which they might contribute. She talked — only partly tongue-in-cheek — about the need for all of us to watch the children’s film, Kit Kittredge: An American Girl, to contrast the world of the 1930s depression where even the bankers lost everything, to our current state where the  bankers who were most directly involved in the mortgage market fiasco have yet to lose their homes.

Tett also made a remark that reminded me of the great line from The Usual Suspects: “The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”  She said, “the best way to hide something is to do it in plain sight and label it as boring.” Anyone who has read The Big Short knows that part of the reason that things like synthetic derivatives got so out of hand is that very few people took the time to understand the details (Scion’s Michael Burry’s claim to fame was that he was one of the few people to read every prospectus.) Tett talked about paying attention to “social silences” — the notion that what is not being discussed is every bit as important as what is being discussed — and being mindful that the core of the power structure often lies in what is seen to be “boring and geeky.” In other words, while we were keeping up with the Kardashians, it is not surprising that the world changed beneath our feet. It’s been said that both God and the devil lie in the details and while that might not be enough to encourage us to read all 56 pages of the new iTunes legal contract, it should make us want to pay closer attention to things in general.

The general takeaway from the day was that the unchecked greed over the last several years has distracted us from creating true value. The good news is that, in spite of ourselves, the shift to a more entrepreneurial landscape is once again leading to innovation. People do seem to be seeking out intrinsically motivating projects and what the broader business world needs to do is take a page from these innovators and change the system for the better.

I received books from all of the speakers that cover these ideas in more detail and I will be posting reviews of a number of them over the next little while.

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