Legendary Behavioral Economist Dan Ariely presents a piece about trade off’s between instant gratification versus long term gratification, reward substitution, cheating, trust/revenge, global warming, executive pay and many other fascinating topics. This video is fascinating and for me is a real insight into the psychology behind economics that is so often over looked in classical economics. This is explained in simple terms that we can all understand and relate to, hope you enjoy!
I wrote before about the errors of compensation in financial services, in a nutshell people were earning money for short term performance in a long term game. However, what I had failed to do was provide potential solutions, this post is about alternative solutions, it will focus primarily on brokerage (because that is what I know best) but it can equally apply to banks or any financial company.
The basic tenets are
1. Long term reward for long term performance 2. Ensuring that bonus’s, while delivered in the short term, have some kind of long term implication. 3. Creating schemes that reward consistency and best advice, rather than one based on transactions.
I would state in advance, that enacting any of these plans will mean further economic pain for a group of workers who are already at the epicentre of the worldwide financial storm, it would also require considerable will to roll out, as well as the co-operation of the banks, the Financial Regulator, …