The Social World versus The Financial World

I’ve been looking into pitching a possible TV show idea to the W Network revolving around the psychology of money and I thought I would share with you a study that I found interesting.

Some psychologists prepared an experiment in which test subjects were asked to perform a mind-numblingly boring task. In this case, they had to click and drag an object on a computer screen from one side of the screen to the other and then repeat over and over again. The experimenters measured the number of times this was accomplished during a five minute time span.

Experiment 1

In experiment 1 there were three groups of subjects. Group one was told they would be paid $5 for the task, Group 2 was told they would receive 50 cents, and Group three was asked to perform the task as a favour to one of the experimenters. Group one had on average moved the object 159 times. Group 2, who were paid less, moved the object about 101 times on average. As you can imagine, this would support the notion that the higher the financial reward, the more motivation is generated. But a funny thing happened with Group 3 – they moved 168 objects on average – about the same as the $5 group. This could be explained by a different thought process in which operating in a social context (being asked a favour) is different from operating in a financial context (relative reward).

Experiment 2

They ran the exact same experiment but this time they chose “social” rewards for all three groups. Group 1 received $5 in fancy Godiva chocolates, Group 2 received a 50 cent chocolate bar and Group 3 was again asked to perform the task as a favour. This time, all three groups scored in the 160s – or in other words, performed about the same. By changing the context from one of financial reward to social reward (money replaced with gifts) the results changed and in this case it really was the thought that counts, not so much the actual reward.

So we can see that our behaviour is influenced by the framework in which we are working. If we are operating with our “financial” mind we behave differently than when we are operating with our “social” mind. There are many ramifications of this finding as it relates to decisions people make about “money” versus “financial goals”.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
Related Posts
Showing 6 comments
  • Mark Wolfinger

    The idea is intriguing, but keep in mind this is TV and EACH show must, on its own, hold the interest of a general TV audience.

    I find experiments such as this to be fascinating. What I don’t know is whether the general population will. How wonderful if you were able to offer a ‘social reward’ for watching the show.

    Good luck.
    Mark

  • Returns Reaper

    Preet, that is an interesting study. To extend this subject a little bit more, what happens when the financial reward changes (either increases or decreases)? That’s the subject of this Harvard Business School paper:

    http://tinyurl.com/d9gng5

    It basically found that increasing the reward made only a temporary increase in productivity, but that over the long term, the amount of production returns to past normals.

    Although getting into that level of detail for a TV show may, as Mark points out, start to get a little too academic for the average TV viewer.

    I guess it all depends on how creative you can be in presenting the information in a fun, exciting, and potentially (unfortunately) dumbed down fashion.

  • Ink-Stained Gorilla

    Instead of dividend distributions – companies may need to be looking at offering MP3 downloads and Starbucks coffee cards.

  • Preet

    @ Ink-Stained Gorilla: The more I think about your idea, the more I think it makes sense. Especially since the cost to the company would be a fraction of the value received by the shareholder.

pingbacks / trackbacks