Here is a very interesting video analyzing the use of incentives for tasks that require “more than rudimentary cognitive skill”. The net result is that more pay doesn’t drive more performance, which is an unexpected result.

When watching this video, something occurred to me. It refers to three primary factors that drive better performance (and personal satisfaction) in these cognitive tasks: Autonomy, (Pursuit of) Mastery, and Purpose. This seems pretty obvious to me, now that I’ve heard someone say it. So if pay isn’t for driving better performance, what is it for?

In the case of the cognitive, self-driven individual, I suspect pay is actually compensation for the surrender of one or more of these factors. Consider someone who would “do the job anyway, even for no pay”. These are the kinds of jobs that I’ve always enjoyed having… but I’ve also enjoyed getting paid for them, so I’ve tried to say things like that out of earshot of my employer! Put simply, workers exchange some autonomy (working on the projects they choose), mastery (specializing in exactly whatever arcane part of the subject they are most fascinated by), and/or purpose (choosing to drive toward a goal that the employer chooses) in exchange for a paycheck. So, someone with a high degree of one factor (say, Mastery) might be convinced through payment to apply that mastery to a different goal (to varying degrees; for example, they may be able to devote a smaller portion of their time driving toward their personal purpose) for a large amount of money.

All this makes me ask, within this framework, “what is it to be an entrepreneur?” To be an entrepreneur is to have a high amount of autonomy, mastery, and purpose. You set all these to “high” and hope to incentivize others to give up some of their factors in order to help you achieve your goal. And in exchange, you typically defer any big money (i.e. salary) you might get until someone wants to take over one or more of these factors, either through acquisition or public offering.

It’s an interesting model, and one that I’m sure I will be using from now on.