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Lecture 7 Achievement and Craftmanship Driving Forces in Economic Behavior

  • Achievement motivation is the drive to excel and succeed in relation to a set of standards (that are set by the individual), a concept pioneered by David McClelland

  • McClelland's Need Theory

    • Three primary needs
      1. nAch (Achievement): Strive for personal success
      2. nPow (Power): Hold authority over others
      3. nAff (Affiliation): Collaborate instead of compete
    • Identifies three core motivators (developed through Behavioral Experiments (1961)), shaping workplace dynamics and economic decisions

  • Need for Achievement (nAch)

    • Strong drive to excel and succeed, need perseverence
    • Tend to seek challenges, prefer personal responsibility
    • Desire regular feedback on their performance
    • e.g. Elon Musk
    • High nAch individuals thrive on challenges (SpaceX, Tesla: ambitious goals)
  • Need for Power (nPow)
    • Desire to influence or lead others
    • Often seek leadership positions, enjoy competitions and concerned with their reputation
    • Types
      • Personalized powers: self-serving (e.g. authoritarian)
      • Socialized powers: team-oriented (e.g. transformational)
    • e.g. Jeff Bezos
  • Need for Affiliation (nAff)
    • Desire for harmonious relationships
    • Individuals high in nAff
      • prioritize cooperation (over competition)
      • seek harmony in relationships
      • excel in customer services and team-oriented environments
    • e.g. Google's colab culture: Psychological safety culture. Feel safe in the company of other people

Applications of McClelland's Need Theory

  • nAch and Entrepreneurship
    • 68% of entrepreneurs have high nAch
    • e.g. Sara Blakely (Spanx founder)
    • show risk tolerance (risk-taking propensity e.g. Steve Jobs), persistence and innovation
  • Economic Growth and nAch
    • McClelland's research suggested correlation between nation's overall achievement motivation and economic growth
  • Gender and Achievement Motivation
    • Women-led startups receive 2.3% of VC despite equal nAch
    • Barriers: Stereotyping, threats and funding bias
    • Whitney Wolfe Herd's Bumble
  • nAch in Corporate Innovation
    • 3M's "15% time" rule: on projects of their choice
    • Google's "20% time" rule: led Gmail and AdSense emerge
    • 3M and Google institutionalized nAch by giving employees autonomy
    • Dark side: Burnout and shortcuts
      • Japanese Karoshi (death due to overwork, substantial deterioration of health)
      • Theranos scandal (11 year jail term)
      • Mitigation: Ethical training, work-life balance policies
  • nPow in Political Economy
    • Corporate Lobbying: $4.1b was spent in 2022 in US politics
    • Influence Markets: Govt and corporations
    • Meta ($20m)
  • nAff in Consumer Behavior
    • Brand Communities: Harley-Davidson's HOG (Harley Owners Group) spread awareness
    • HOG riders aren't customers, they are tribes
    • Social commerce: 47% of Gen Z buy via TikTok/Insta

  • Key Takeaways

    • nAch drives innovation but requires ethical check
    • nPow shapes corporate-political dynamics
    • nAff fuels brand loyalty and social commerce

  • Measuring Achievement Motivation

    • Thematic Apperception Test (TAT)
    • Self-Reports: Questionnaires
    • Behavioral Metrics: customer behavior and expected engagement
    • Investors use pitch competitions to gauge founders' nAch
    • Cultural context should be taken into account
  • Thematic Apperception Test (TAT)
    • Series Cards with Black and white images of people in various situations
    • "Tell a story about each card, what is happening, what are they thinking or feeling"
    • Individuals will project their own thoughts, feelings and experiences onto ambiguous stimuli
    • Picture interpretation technique
    • Interpretation: Analyze stories for recurring themes, patterns and content to understand the personality or psychological process
  • Enjoyment of Anticipation
    • George Shackle (1940s)
    • Why do people take part in gambling even if the odds of winning a lottery is so small? It is because they enjoy the excitement of thinking about what they would be able to do if they did win. Anticipal pleasure
    • Neoclassical analysis ignores the enjoyment by anticipations and underestimates the demand for lotteries
    • If the theory is correct then consumers will have a motivation for making commitments for consumption activities (Jacob Collier concerts, vacations etc) in advance of the time necessary to ensure the event can be organized.
    • E-commerce wishlist: I might buy them in the future. The idea/anticipation of owning them in the future gives us joy (just like how daydreaming give us novel stimuli)
    • Tibor Scitovsky (1985) noted: modern shopping environments in malls offer us a lot of visual and other stimuli.
    • Hawtrey noted: We get motivation out of distress. The focus is to keep the distress at bay, rather than new experiential opportunities
    • Scitovsky (1981) noted: excess comfort in affluent societies \(\implies\) reason for pursuit of high-excitement activities. E.g. mountaineering, theme park rides to get a sense of living on the edge
    • Scitovsky (1976, 1981): comfort and novelty/stimuli have an inverted U-shaped curve.
  • The Instinct of Workmanship (IoW): Thorstein Veblen
    • Economic reasoning? Start with understanding human behavior first. Human nature = irreducible innate instincts + learned habit
    • Instincts = innate tendencies of the mind (evolved in the process of adaptation to the environment) at a special level.
    • Workmanship is the main determinant of technological progress
    • Instinct \(\implies\) Appreciation of effective work, distaste for future work and drive for technological improvement
    • Key elements
      • Pride in workmanship
      • Efficiency and Effectiveness in production
      • Aversion to waste and futility

        If the existing institutional circumstances are not too OBSTRUCTIVE, then the instinctive nature of humans will express itself in ways that give rise to new technological insights.

    • This contrasts "Pecuniary Emulation"
    • Japan's Monozukari: Prioritize mastery over profit
  • Craftsmanship and Economic Behavior
    • This instinct of workmanship influences product quality, innovation and consumer preferences
    • We see a growing market for artisanal and handmade goods. E.g. Luxury Craftsmanship: Hermes handbags ($10K+). Artisanal markets: $1.2T globally (UNESCO)
  • Intrinsic vs Extrinsic Motivation in work
    • IoW relates to intrinsic motivation (internal satisfaction).
    • Intrinsic: Joy of creation
    • Extrinsic: Bonuses, promotion
    • Evidence: IM boosts creativity by 34%
  • Impact on productivity and Innovation
    • Innovation: Patagonia's Worn Wear - Repair over replacement
    • Patagonia's repair program: $100M+ revenue stream driven by craftsmanship values.
  • Case Study: Rolex's Craftsmanship
    • Consumer Perception: "Heirloom" value. 1-year production cycle creates artificial scarcity.
  • Case Study: Craftsmanship in the Modern Era (?)
    • 'Marker movement': DiY concept