Imagine it’s 1995. You sit down with an economist—an accomplished business school professor with a Ph. D. in economics. You say to her: “I’ve got a crystal ball here that can peer fifteen years into the future. I’d like to test your forecasting powers.”
She’s skeptical, but she decides to humor you.
“I’m going to describe two new encyclopedias—one just out, the other to be launched in a few years. You have to predict which will be more successful in 2010.”
“Bring it,” she says.
“The first encyclopedia comes from Microsoft. As you know, Microsoft is already a large and profitable company. And with this year’s introduction of Windows 95, it’s about to become an era-defining colossus. Microsoft will fund this encyclopedia. It will pay professional writers and editors to craft articles on thousands
of topics. Well-compensated managers will oversee the project to ensure it’s completed on budget and on time. Then Microsoft will sell the encyclopedia on CD-ROMs and later online.
“The second encyclopedia won’t come from a company. It will be created by tens of thousands of people who write and edit articles for fun. These hobbyists won’t need any special qualifications to participate. And nobody will be paid a dollar or a euro or a yen to write or edit articles. Participants will have to contribute their labor—sometimes twenty and thirty hours per week—for free. The encyclopedia itself, which will exist online, will also be free—no charge for anyone who wants to use it.
“Now,” you say to the economist, “think forward fifteen years. According to my crystal ball, in 2010, one of these encyclopedias will be the largest and most popular in the world and the other will be defunct. Which is which?”
In 1995, I doubt you could have found a single sober economist anywhere on planet Earth who would not have picked that first model as the success. Any other conclusion would have been laughable—contrary to nearly every business principle she taught her students. It would have been like asking a zoologist who would win a 200-meter footrace between a cheetah and your brother-in-law. Not even close.
Sure, that ragtag band of volunteers might produce something. But there was no way its product could compete with an offering from a powerful profit-driven company. The incentives were all wrong. Microsoft stood to gain from the success of its product; everyone involved in the other project knew from the outset that success would earn them nothing. Most important, Microsoft’s writers, editors, and managers were paid. The other project’s contributors were not. In fact, it probably cost
them money each time they performed free work instead of remunerative labor. The question was such a
no-brainer that our economist wouldn’t even have considered putting it on an exam for her MBA class. It was too easy.
But you know how things turned out.
On October 31, 2009, Microsoft pulled the plug on MSN Encarta
, its disc and online encyclopedia, which had been on the market for sixteen years. Meanwhile, Wikipedia—that second model—ended up becoming the largest and most popular encyclopedia in the world. Just eight years after its inception, Wikipedia had more than 13 million articles in some 260 languages, including 3 million in English alone.1
What happened? The conventional view of human motivation has a very hard time explaining this result.
THE TRIUMPH OF CARROTS AND STICKS
Computers—whether the giant mainframes in Deci’s experiments, the iMac on which I’m writing this sentence, or the mobile phone chirping in your pocket—all have operating systems. Beneath the surface of the hardware you touch and the programs you manipulate is a complex layer of software that contains the instructions, protocols, and suppositions that enable everything to function smoothly. Most of us don’t think much about operating systems. We notice them only when they start failing—when the hardware and software they’re supposed to manage grow too large and complicated for the current operating system to handle. Then our computer starts crashing. We complain. And smart software developers, who’ve always been tinkering with pieces of the program, sit down to write a fundamentally better one—an upgrade.
Societies also have operating systems. The laws, social customs,
and economic arrangements that we encounter each day sit atop a layer of instructions, protocols, and suppositions about how the world works. And much of our societal operating system consists of a set of assumptions about human behavior.
In our very early days—I mean very early days, say, fifty thousand years ago—the underlying assumption about human behavior was simple and true. We were trying to survive. From roaming the savannah to gather food to scrambling for the bushes when a saber-toothed tiger approached, that drive guided most of our behavior. Call this early operating system Motivation 1.0. It wasn’t especially elegant, nor was it much different from those of rhesus monkeys, giant apes, or many other animals. But it served us nicely. It worked well. Until it didn’t.
As humans formed more complex societies, bumping up against strangers and needing to cooperate in order to get things done, an operating system based purely on the biological drive was inadequate. In fact, sometimes we needed ways to restrain this drive—to prevent me from swiping your dinner and you from stealing my spouse. And so in a feat of remarkable cultural engineering, we slowly replaced what we had with a version more compatible with how we’d begun working and living.
At the core of this new and improved operating system was a revised and more accurate assumption: Humans are more than the sum of our biological urges. That first drive still mattered—no doubt about that—but it didn’t fully account for who we are. We also had a second drive—to seek reward and avoid punishment more broadly. And it was from this insight that a new operating system—call it Motivation 2.0—arose. (Of course, other animals also respond to rewards and punishments, but only humans have proved able to channel this drive to develop everything from contract law to convenience stores.)
Harnessing this second drive has been essential to economic progress around the world, especially during the last two centuries. Consider the Industrial Revolution. Technological developments—steam engines, railroads, widespread electricity—played a crucial role in fostering the growth of industry. But so did less tangible innovations—in particular, the work of an American engineer named Frederick Winslow Taylor. In the early 1900s, Taylor, who believed businesses were being run in an inefficient, haphazard way, invented what he called “scientific management.” His invention was a form of “software” expertly crafted to run atop the Motivation 2.0 platform. And it was widely and quickly adopted.
Workers, this approach held, were like parts in a complicated machine. If they did the right work in the right way at the right time, the machine would function smoothly. And to ensure that happened, you simply rewarded the behavior you sought and punished the behavior you discouraged. People would respond rationally to these external forces—these extrinsic motivators—and both they and the system itself would flourish. We tend to think that coal and oil have powered economic development. But in some sense, the engine of commerce has been fueled equally by carrots and sticks.
The Motivation 2.0 operating system has endured for a very long time. Indeed, it is so deeply embedded in our lives that most of us scarcely recognize that it exists. For as long as any of us can remember, we’ve configured our organizations and constructed our lives around its bedrock assumption: The way to improve performance, increase productivity, and encourage excellence is to reward the good and punish the bad.
Despite its greater sophistication and higher aspirations, Motivation 2.0 still wasn’t exactly ennobling. It suggested that, in the end, human beings aren’t much different from horses—that the way to get us moving in the right direction is by dangling a crunchier carrot
or wielding a sharper stick. But what this operating system lacked in enlightenment, it made up for in effectiveness. It worked well—extremely well. Until it didn’t.
As the twentieth century progressed, as economies grew still more complex, and as the people in them had to deploy new, more sophisticated skills, the Motivation 2.0 approach encountered some resistance. In the 1950s, Abraham Maslow, a former student of Harry Harlow’s at the University of Wisconsin, developed the field of humanistic psychology, which questioned the idea that human behavior was purely the ratlike seeking of positive stimuli and avoidance of negative stimuli. In 1960, MIT management professor Douglas McGregor imported some of Maslow’s ideas to the business world. McGregor challenged the presumption that humans are fundamentally inert—that absent external rewards and punishments, we wouldn’t do much. People have other, higher drives, he said. And these drives could benefit businesses if managers and business leaders respected them. Thanks in part to McGregor’s writing, companies evolved a bit. Dress codes relaxed, schedules became more flexible. Many organizations looked for ways to grant employees greater autonomy and to help them grow. These refinements repaired some weaknesses, but they amounted to a modest improvement rather than a thorough upgrade—Motivation 2.1.
And so this general approach remained intact—because it was, after all, easy to understand, simple to monitor, and straightforward to enforce. But in the first ten years of this century—a period of truly staggering underachievement in business, technology, and social progress—we’ve discovered that this sturdy, old operating system doesn’t work nearly as well. It crashes—often and unpredictably. It forces people to devise workarounds to bypass its flaws. Most of all, it is proving incompatible with many aspects of contemporary
business. And if we examine those incompatibility problems closely, we’ll realize that modest updates—a patch here or there—will not solve the problem. What we need is a full-scale upgrade.
THREE INCOMPATIBILITY PROBLEMS
Motivation 2.0 still serves some purposes well. It’s just deeply unreliable. Sometimes it works; many times it doesn’t. And understanding its defects will help determine which parts to keep and which to discard as we fashion an upgrade. The glitches fall into three broad categories. Our current operating system has become far less compatible with, and at times downright antagonistic to: how we organize what we do; how we think about what we do; and how we do what we do.
How We Organize What We Do
Go back to that encyclopedic showdown between Microsoft and Wikipedia. The assumptions at the heart of Motivation 2.0 suggest that such a result shouldn’t even be possible. Wikipedia’s triumph seems to defy the laws of behavioral physics.
Now, if this all-volunteer, all-amateur encyclopedia were the only instance of its kind, we might dismiss it as an aberration, an exception that proves the rule. But it’s not. Instead, Wikipedia represents the most powerful new business model of the twenty-first century: open source.
Fire up your home computer, for example. When you visit the Web to check the weather forecast or order some sneakers, you might be using Firefox, a free open-source Web browser created almost exclusively by volunteers around the world. Unpaid laborers who give away their product? That couldn’t be sustainable. The incentives are all wrong. Yet Firefox now has more than 150 million users.
Or walk into the IT department of a large company anywhere in the world and ask for a tour. That company’s corporate computer servers could well run on Linux, software devised by an army of unpaid programmers and available for free. Linux now powers one in four corporate servers. Then ask an employee to explain how the company’s website works. Humming beneath the site is probably Apache, free open-source Web server software created and maintained by a far-flung global group of volunteers. Apache’s share of the corporate Web server market: 52 percent. In other words, companies that typically rely on external rewards to manage their employees run some of their most important systems with products created by nonemployees who don’t seem to need such rewards.
And it’s not just the tens of thousands of software projects across the globe. Today you can find: open-source cookbooks; open-source textbooks; open-source car design; open-source medical research; open-source legal briefs; open-source stock photography; open-source prosthetics; open-source credit unions; open-source cola; and for those for whom soft drinks won’t suffice, open-source beer.
This new way of organizing what we do doesn’t banish extrinsic rewards. People in the open-source movement haven’t taken vows of poverty. For many, participation in these projects can burnish their r...