Money isn't what you think!
Most of us have experienced Incentive theory if not heard about it explicitly. I have both heard and experienced incentive theory or widely known as the agency theory: why don’t managers always behave in a way that is in the best interest of shareholders? In 1979, the theory was developed by Michael Jensen and William Meckling. They figured that the managers worked in accordance with the money they got paid. The theory is widely accepted and has been the most cited theory in history. It works with simple logic, if you have your incentives set right, your work will get done.
We have all experienced this to an extent. When we are forced to work hard or work more, we expect better compensation. More money works as an incentive for more work and so on and so forth.
But does that extra money really tick you?
For a brief time maybe, it might. You will work harder and longer and maybe even more sincere, but what happens once the excitement of the extra pay wears down?
What will you start wishing for then? More money?
Do you see the problem with the incentive theory?
Yes, it works in a circle. And mind you it is a vicious circle. Where does this more money for more work end? I don't have a definite number, but I am fairly certain a lot of us are stuck in this circle.
Money isn't the motivator we think it is. At best, it makes us act like a kid doing his chores for candy.
So what is it that truly motivates you if not money?
Frederick Herzberg, one of the best writers on motivation has a different take that turns the incentive theory on its head! According to him, people are not on a spectrum where they either really love their jobs or hate their jobs, but that both hate and love are possible at the same time. Based on his theory it is possible for one to both hate and love their job.
He breaks the incentive for working into two parts. A hygiene factor and a Motivation factor. Hygiene factors are things like status, compensation, job security, work conditions, company policies, and supervisory practices. Bad hygiene causes quick dissatisfaction, but good hygiene does not really make you satisfied.
Something like money is a part of a hygiene factor. It is good to have because we all have our houses to run, but it isn’t enough. This is an important insight from Herzberg’s research: if you instantly improve the hygiene factor of your job, you’re not going to suddenly love it. At best, you just won’t hate it anymore. The opposite of job dissatisfaction isn’t job satisfaction, but rather an absence of job dissatisfaction.
According to Herzberg, motivating factors include challenging work, recognition, responsibility, and personal growth. Feeling that you are making a meaningful contribution or being appreciated for your work, etc.
If money were a true motivator we wouldn't have soldiers working long hours under grueling conditions for measly pay.
So how does this apply to your investments?
Well for one chasing fads like “Get 1 crore in 10 trading days” and “Do these 4 things and you will be rich” is going to take you further away from your true motivation. Money is just a hygiene factor that will cause temporary happiness at best. You will have to find your true motivation.
My true motivation to invest is to have enough money that allows me to have real relationships with people around me, to support me or care for me.
These are my true motivator which does not require me to get rich in 10 days or make 100% a year.
What is your true motivation?
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