Book review:”Payoff” – Dan Ariely


Normally I don’t read that many books “fresh of the press”, but this one really interested me. First, because it was from Dan Ariely and second, because it deals with a very important topic in my opinion: What motivates people (to work).

“Payoff” is a quite short book (only 128 pages) with a relatively simple message: Not money is the big motivator, but respect and appreciation.

He provides a couple of very interesting examples and experiments. The most interesting is a real life experiment in Israel where they tested how Intel factory workers react to 4 different kind of incentives if they meet certain criteria:

1) Promise and payment of an extra bonus, 2) Promise of a Pizza voucher, 3) Just an Email with “Job well done” 4) nothing at all.

The result is pretty interesting: On day one, the guys with the bonus do best, closely followed by the Pizza and then the Email and nothing. However on day two of a four-day shift, the ones which got a bonus suddenly showed significant lower motivation and productivity. Over the full 4 days, surprise surprise, the ones which got the Email on day one performed best.

Overall, Ariely makes a pretty compelling case that money in many cases can even be a pretty harmful “motivator”.

My take-away for investing

I think this is a pretty interesting insight also for stock investors. When I wrote my post about the “12 Ways how the “Ideal Company” should be run”, I mentioned that the interest of Management, employees and shareholders should be long termed aligned.

The question is of course HOW to effectively align those interests. One thing we all learned from the great financial crisis is that huge cash bonuses do not insure alignment. In the case of Lehman and Bear Stearns rather the opposite was true.

Personally I do think that in order to really align all stakeholders for a long-term, a real “Mission” or “Vision” and/or a strong culture can help, especially if it is shared by all stakeholders. Clearly if you chronically underpay your employees, even the best “Mission” cannot help much, but I do think that a clear mission really can help to achieve long-term success.

If this is combined with a reasonable share of the success for everyone involved, then great things can happen. The only problem is finding such companies at reasonable valuation.


“Payoff” is a short book with a clear message. However with a price of 10 EUR for the Kindle version it seems to be on the expensive side. But if you don’t mind the money, it is a good and interesting read. I have to mention that I didn’t read any other book of him, but plan to do so.










  • Hi mmi, you seem to like Dan’s work. There used to be some of his courses on available – for free. I went though a course called “Beginner’s Guide to Irrational Behavior” and found it very interesting.

  • That reminds me of the list of Charles Munger, what he expects of a good chairman of his company.
    Point 8: “He would also spend much time in enthusiastically admiring what others were accomplishing.”

    I think it is hard to overestimate the effect of shown respect and praise for your colleagues and subordinates.

  • Speaking for my experience: I consider my boss a dummy licker (I am gross, sorry, but he really is!) who never appreciated my work.
    Last year he paid me a 120% bonus, but kept without appreciating my job. (I am a fintech programmer, he is a uneducated accountant, 20+ years in the company).
    1 week after, I still kept thinking he is just a licker. If he would have started giving credit to my work, I would maybe start thinking differently of him.

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