Further thoughts on today's class session

I wanted to note something more general about the first part of the session.  We had fun. And I believe students learned something.  My ideal is to have "educative play" where participants grow from the experience and enjoy it at the same time.  This is distinct from "dissipative play" where there is fun but no personal growth.  You almost surely need some of that too, to recharge your batteries, but the thought is that if you can combine work and play then life is good.   For a few minutes today, I thought we achieved that. 

A couple of other points about schmoozing I should have made.  It is a generalist skill.  If you are a good schmoozer you should be able to do that with lots of quite different people.  Thus, it benefits from good generalist reading,   I made a suggestion to do this a while back (it is in the last section of this post) where I said it would help you climb the ranks of management.  It will also definitely help you in schmoozing.  It is especially good if you can relate the discussion to some reading and stay in context the whole time.  Talking with people is one way to stay informed.  Reading good an interest stuff is another.  You really should be doing both. 

The other point is about how instrumental the class seemed at first on why to engage in the schmoozing.  I hope it will be obvious to you that if you are overtly instrumental about that or any other behavior, then you will not appear genuine.  In other words, being instrumental can block your ability to listen.  So, I believe, the primary reasons to schmooze is because it is enjoyable.  The connections you make as a consequence should be considered byproduct only.  If you reverse the order of priority, you won't get as much out of doing it. 

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I forgot something not class related, but that I wanted to announce to the class.  Bur first here is an economic theory of predictions.  If you are going to make a prediction, it is better for it to be outrageous.  In the rare even that you are proven right, you'll be considered a genius, with outstanding insight.  In the complementary event where you are proven wrong, you hope that people will quickly forget bout your prediction and, after all, life is a random walk, so it can't be forecast.

Now with that as background, I'm predicting that Carlos Beltran will be the next manager of the New York Yankees.  ESPN says this is a long shot. 

You heard it here first.

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The Sherry Turkle piece I briefly showed is called Stop Googling.  Let's Talk.  You should definitely read it.  Soon after it appeared I had a little email thread with her about it.  Since she responded to my query I was emboldened to send today's rhyme qua lesson plat to her.  At least she acknowledged receipt.  That is below.

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From: Sherry Turkle [sturkle@media.mit.edu]
Sent: Thursday, November 16, 2017 10:04 AM
To: Arvan, Lanny
Subject: Re: I thought you might enjoy this.

Thank you!

S

On Nov 16, 2017, at 9:57 AM, Arvan, Lanny <larvan@illinois.edu> wrote:

Teaching students to schmooze
Over coffee rather than booze
And to enjoy the doing
Even if misconstruing
Good face to face conversation is news.
#ItTurnsOutTalkIsntCheap

Found here:  https://twitter.com/larvan3/status/931120054854352897

For Our Discussion on Learning to Be a Leader

This posts is pretty short and I believe students will find it interesting.  There is a link to a column by Sherry Turkle a little later in the piece.  That is a must read.

Lanny on Learning: Soft Skills Revisited via kwout

Second Quiz in Moodle - Date Set

We agreed in class today that the second quiz should be on Thursday Nov. 30, starting right after class, and going through Friday December 1, with it closing at 5 PM.  The format might be a tad different than the last time, but not too much.  After it is created and after Thanksgiving break, I'll let you know. 

I also committed to the Final Quiz to be online in Moodle on and around when our Final Exam is scheduled in the timetable.  (Somebody in class said that was December 18 but I haven't verified that yet.)  So, if Econ 490 is your last exam, you can leave town before the final and do it from home. 

We should all be thankful for online technology.

Excel Homework Due 11/29 at 11 PM

Please watch this video first.  It gives the algebra of the principal-agent model and will make you comfortable with the notation and the basic ideas.

Then do the Excel homework, which does the same analysis but this time with a graphical approach.

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This is the simplest possible model of the principal-agent, with low or high effort and low or high output.  I am going to describe possible extensions of the model for you to consider (and which we might discuss in class) but which we won't model.

The first is to make output a continuous variable.  This, it turns out isn't conceptually that much harder, as long as higher output makes it more likely that the agent chose high effort.  In that case, the reward scheme should also rise with output.  In many real world reward schemes, the scheme is linear.  For example, it entails a base pay and then some percentage share of the output.  A lot of sales people work under schemes of this sort.  Linearity is hard to explain from the model, but it is easy to understand in that it can be readily communicated.  More complex schemes would be harder to articulate and to understand.

The second is to make effort a continuous variable, with higher effort making higher output more likely.  This too is not that hard to conceptualize, but then you lose the notion of shirking in the model, unless you establish a cutoff effort level below which the agent is said to shirk.

Further extensions make both output and effort multi-dimensional.  This is definitely harder to consider theoretically, but it is far more realistic, especially for knowledge work.  As I have said in class before, professional knowledge workers typically don't shirk (play solitaire on their computers all day or do Facebook, though they might do it as a diversion from time to time to refresh themselves).  Such employees have a strong sense of autonomy.  The issue for the manager is to align what these workers are doing with organizational objectives.  Monitoring happens to achieve alignment, not to prevent shirking.

The last extension I will mention is considering what happens when output has a large random component to it so it is not a very informative signal.  A little bit of randomness doesn't change the story much.  A lot of randomness does.  (The agent is risk averse and if you make a risk averse individual absorb a lot of risk, you need to pay a substantial risk premium to compensate for that.)  So instead, one looks for other solutions and then not rely on rewards for high output.

Precise Measurement and Measurement Error

Economics Jokes via kwout

I'm Back from Michigan and Catching Up

If you'd like to see what I attended, take a look here.  In some sense it was like a return to being an undergraduate.  I sat through a full lecture where more than 90% of the presentation was over my head!  But when it is your brother who is giving the lecture it has interests for other reasons.  I didn't check my phone once during the entire thing.

I've done a quick scan of YouTube, where I see the video meant as a substitute for yesterday's class has gotten some hits (the data about minutes watched hasn't been processed yet) and I saw in Moodle that 16 students completed the softball quiz associated with the video.  We'll discuss this a bit tomorrow as we try to catch up. 

I want to note here the two additional obligations before the Thanksgiving break.  There is a blog post due tomorrow on conflict.  In some sense this post is on the opposite end of the spectrum for the one for last week.  By contrasting the two I believe there will be more meaning for you in each case.    Then, of course, second drafts of your project papers are due a week from Friday. 

A linkage between altruism and intrinsic motivation

In the Excel Homework due after the Thanksgiving break, we will take on the principal-agent model, which you can think of as giving a basis for performance based pay.  Some type of work, notably jobs in sales, typically entail performance based pay.  So we need to understand why that is. 

Yet the latest blog post you wrote on teamwork and gift exchange included reacting to a piece on altruism  The column by David Brooks argued that altruistic motives are inhibited when economic incentives are present.  The lesson from Brooks' piece is that when altruism is important for organization productivity (as in the gift exchange model, the Okun implicit contracts view, or the Akerlof and Kranton view where identity is important) then economic incentives need to move to the background.  It is my view that you can't eliminate economic incentives entirely and shouldn't try.  But performance based pay moves economic incentives front and center so the incentives are always present.  Type A personalities may want such an environment.  The B personalities prefer something that is more low key.  Yet the research which Brooks reports on argues that either type of personality will be less altruistic in the presence of performance pay. 

There is a different reason to depart from performance based pay that is intellectual in nature and is particular to knowledge work.  This other view is articulated by Daniel Pink in this RSA Animiate video and focuses on psychological explanations for productivity.  There can be performance anxiety or, if you prefer, writer's block.  If this persists, evidently it lowers productivity. High performance is achieved when intrinsic motivation is strong and the individual becomes so involved in the work as to entirely lose a sense of self.  Making extrinsic rewards overt then moves the individual's focus away from the intrinsic motivation and thereby lessons productivity.  Better to have the economic rewards provided up front, so that one can put them out of mind when the real work commences. 

I have critiqued this video on how it represents the economics.  You can't put the economic incentives away forever after a single, up-front contracting process.  There will be subsequent re-contracting to enlist the employee again in the future, especially after word about the previous work has gotten out and the employee's reputation has been enhanced as a consequence. Yet I concur with its representation of the importance of intrinsic motivation. So my view is that the manager tries to achieve a balance between the two types of motivation.  You might consider time broken up into episodes.  Each episode begins with extrinsic rewards to enlist participation.  After that the work begins and the rewards fade into the background.  Then intrinsic motivation takes over for a time.  As the episode reaches conclusion the extrinsic motivation returns and the next episode begins. 

This system is by no means perfect.  (The economic rewards can reappear too early and interfere with intrinsic motivation when the work is not yet completed.  Alternative, the manager might pretend the work is not yet done so as not to make an appropriate upward adjustment in the employee's pay, creating hard feelings in the process and inadvertently encouraging turnover.)  But it is better, in my view, than the alternative where rewards for performance are omnipresent.  An environment with strong pay for performance incentives is likely to inhibit both altruism and intrinsic motivation.