The appreciation economy with Dan Ariely – episode 14

Episode 14 summary

February 18, 2025 // 26 min, 52 sec

Will praise replace pay checks in the future? There’s evidence we put more value on how we're appreciated at work than on our financial reward – listen to the evidence behind this trend and what it'll mean for the employer of 2050.​

In this episode:

Marissa is joined by Professor of Psychology and Behavioral Economics at Duke University and New York Times best-selling author Dan Ariely. His seven-year study of the Fortune 1,000 holds surprising insights into the prize for actively valuing employees more.​

• Appreciating employees isn't just about attracting and retaining talent: it's a more accurate predictor of share price performance than pay rates.​
• These intrinsic, emotional rewards will matter more than extrinsic, financial ones.​
• Businesses that learn to meet the emotional needs of their employees will be the winners.​
• How will HR have to change to see this premium quantified and communicated in company performance?

Episode transcript

Marissa Geist 

Welcome to the Talent Time Machine, the podcast for talent leaders that takes you on a trip to the world of work in 2050. We’re going to think about trends, possibilities, and new realities for talent.  

Today, we’re exploring the future of work, where the best employers don’t just reward people financially, but satisfy their rational… and even their irrational… needs.  

Understanding humans is a foundation for a great workplace.  

Salary and extrinsic rewards don’t win best talent even today. But we’re just beginning to understand how supporting emotional needs drives superior performance.  

By 2050, you’ll need to have mastered those dynamics in order to succeed.  

I'm Marissa Geist. I'm joined by Dan Ariely, professor of psychology and behavioral economics at Duke University, and New York Times bestselling author who has not only created these theories but has also invested along those lines and claims to have great success. Welcome Dan, it's great to have you. 

Dan Ariely 

Lovely to be here, looking forward to our discussion. 

Marissa Geist 

All right, so before we jump in, as an academic, what drew you to focusing on the future of the world of work? 

Dan Ariely  

So I'm a social scientist, and social scientists in general, we look for gaps. We look for places where human potential is higher than what we're doing right now. And of course, there's lots of places to look for it. We don't sleep well enough. We don't exercise, we don't eat, we text and drive. The list goes on and on, we hate and so on. But the workplace is certainly one of those. 

And I've asked the following general question to lots of people. And here it is. Imagine that I called your current performance at work 100. How much lower can you get and not lose your job? And then I say, and how much higher you can get above 100 if you were truly excited about what you're doing? 

And that for me is the motivational gap. The difference between the minimum you have to do not to lose your job and the max you could do if you're truly excited, that's kind of discretionary effort. How much effort do you want to put in the workplace? And the difference between what you're currently doing and what you could be doing if you were truly excited is the lost potential.  

And here's the other side of this equation. I look at people and I say to myself, my goodness, people are capable of unbelievable acts. You know, since the dawn of history, people created art, people run marathons, people write books, people do startups. And we do all kinds of things. We have this tremendously built-in motivation. And it's kind of amazing when it's tapped. But of course, if you don't know how to tap it, everybody loses. 

Tapping the maximum human motivation is tough, but doing better than we are is really easy. 

Marissa Geist  

And is it a really easy thing to do based on what we know today? Or do you think it's going to take us a while to understand… you talk about rational and irrational behaviors. Maybe you could spend a little time talking about that. 

Dan Ariely  

Yeah. So I started my career in the lab. And I would do different experiments on human motivation. I'm happy to describe some of them. And I learned a lot of secrets of motivation. Then I did research in companies. I would go to companies one at a time, and I would change bonuses, and I would change all kinds of things. And the thing about it was always easy to improve.  

And now we have this third wave of doing stuff and looking at the stock market. But I think that there's a lot of nuances that are very tough to figure out, and there's lots of low-hanging fruit that is very easy. And we know enough to make almost every workplace substantially better.  

And I think part of it is, you tell me, you know organizations better than I do. My sense is that HR in most organizations is kind of the closest to the lowest of the pyramid. It's maybe above compliance.  

But, in many organizations, HR ends up dealing with, you know, let's do the ethics module and let's worry about time off and how much are we in the office versus not.  

But HR should be the keepers of human motivation. But they almost never have budgets and they almost never have this particular role. Most of their roles are procedural. And I think because of that, there's lots of untapped motivation, a lot of motivation that people could have and then it's just wasted. And then people work with half energy and then they go and they have hobbies. Why can't you take your hobbies and recruit some of this motivation to work? 

Marissa Geist  

And when we talk about HR being on the lowest rung of the ladder, and you see that in the Fortune 1000 companies you follow, if there's a good workplace culture, there's better financial performance, correct? 

Dan Ariely 

Yes. We basically took two types of data. We started with these surveys that everybody has. And we basically said, look, we have all these surveys. Let's think of them as one question at a time. Let's see if the responses to those questions predict anything in terms of stock market return. Not for the moment, but for the following year.  

So for example, we said, imagine that we took the question. There's no question in the survey how much you enjoyed the coffee at workplace, but let's imagine there was a question like this. And imagine you sorted all the companies from the company who is the best in terms of coffee quality perceived by the employees to the worst. And you said, let's not invest in all 500 of them, let's just invest in the top 20%.  

We had data going back to 2006. So we could say, imagine in 2006 we invested in the top 20% company who treat their employees best on coffee quality. And we do this for every question in the set. Coffee quality, chairs and tables, how equal do you feel that you're being treated? How connected you are to your manager, psychological safety, you name it.  

And we created many, many imaginary portfolios. And the first question we asked is how many of those portfolios beat the S&P 500? And almost all of them did. And of course, you don't build a portfolio by asking one question and taking the top 20%. But it tells you that there's some real value in this data. 

And we didn't pick those questions. It was whatever was out there that we did. But then the question is, OK, so we have signal. We have lots of questions. But some questions are just like the S&P or maybe slightly better. And some are much, much better. So now you start asking the question, which of the questions makes a real difference? Which one of them are just, eh, and which one of them make a big difference?  

So for example, salary. Do companies that pay better have higher return on stock value? The answer is no. Do companies that have higher retirement benefits? No. Healthcare benefits? No. Tables, chairs? No.  

It turns out that when we talk about motivation, we usually make a very rough separation between extrinsic motivation and intrinsic motivation. Extrinsic motivation is bonuses, salary, health benefits, vacation packages. Intrinsic motivation is the fire that burns within you. Almost all the action was on the intrinsic motivation, not on the extrinsic one.  

One of the interesting points was that the level of actual salary didn't make a big difference. When people were asked, how fair do you feel you're compensated? That made a big difference. The feeling about fairness made a big difference.  

Psychological safety made a big difference. Whether people feel appreciated made a big difference. Bureaucracy, of course, decreased motivation. But it ended up being all about intrinsic motivation. Extrinsic motivation doesn't add much to the equation. 

And when it comes to these motivation, you know, they're closer to love and pain. How connected do you feel to your direct manager? How appreciated do you feel? Like I can't count how many times people say thank you on email. It's not the same as feeling appreciated. So I think that we need to understand that these internal states is actually what we're after. 

Marissa Geist 

So businesses love to measure things, to set targets. I’m interested, can we actually measure those internal state you talk about. Are there numbers for it? We may not have the data sets now, but what is the most valuable thing we can start to measure? 

Dan Ariely 

One of the best predictors that we have right now is, do you feel appreciated? Just imagine where is going to feel appreciated going to be in the brain, and how are we going to measure it? I can imagine that one day we would get there. Maybe with some neural implants, we could even change it.  

Marissa Geist 

That's terrifying. But you can know that now, though. You can say, I mean, the feeling is the data. It doesn't have to be grounded on anything. Fairness is still a feeling. My mother used to say a fair is where you go to see pigs and cows. But that's OK. It's true. It's not a hard measure. But if it translates into performance, I would speculate that in 10 years, people will say, well, why weren't you using this before. It's available to you now. But it's discounted now. It's not given budget. It's not given credence.  

Dan Ariely  

That's right. And there are two points. One is that investors don't measure it to figure out which companies we should do this. And I talk to lots of investors, and they say, we talked to the CEO, or we talked to the CFO about the state of motivation in the organization. They don't even know.

Marissa Geist  

Well, what do you think will change it though? Because I just think that there'll be this breakthrough moment where it's just going to be like, so obvious, glaringly obvious, and then everybody will do it. Just like some of the inclusive practices we have today. It'll just be like, why did I go to work in a suit every day, an hour away from my house, drop my child off at 6:45 in the morning, pick them up at 6:30 at night and think that that was fine when now we can work from home? The technology wasn't there, understanding wasn't there, but... 

Don't you think there'll be a moment where it's just like, we can connect this, we can prove it. It's still based on feelings, but feelings are reality in this sense. 

Dan Ariely  

I sure hope so, but I think it will take a little bit longer. And I'll tell you why. I think that we, with our economic models, we think about people like machines. If you look at what we're designing, it's kind of like we think of people as like rats in a maze and we're redesigning the maze. I'm saying, okay, we want people to do a little bit more on this. Let's do a bonus for that. 

Marissa Geist  

Simplify the maze. Another pellet at the end. I see. 

Dan Ariely 

That's right. Our intuition is that people are driven by extrinsic motivation. And it will take a while to override this intuition. So you look at your company and you say performance is low and you say, what can I do? And the simple answer is put a little bonus. 

Marissa Geist  

Yes, which we know doesn't work in the long term. I mean, actually, that's been proven over and over again.  

Dan Ariely  

That's right. But the intuition is so strong. And one of the interesting things about emotions versus cognition is that when we think about other people, we think in reasons. So you ask people, what would motivate people to do X, Y, or Z? People think, it has to be a reason. So let's give them more motivation.  

And when you ask people, what does motivate you? Give me a day that you worked extra hard. What was it about that? Or what was the point in your life that you felt you made the highest impact? What really motivated you? People rarely say it's about themselves. But about other people, we have this very mechanic view of extrinsic motivation. And that's a complex barrier to overcome. 

Marissa Geist  

Since the podcast is 2050, I have to ask you by 2050, do you think that we'll have overcome it? Do you think we'll still be wrestling with it? 

Dan Ariely  

I think it's partially my job to make sure that we get there. I started research on human motivation because I think as human motivation is being wasted.  

I've been spending lots of time on this project, and I'm trying to show the impact on stock market performance because I think that that's the way to make a difference.  

I think if I could get CFOs to basically say, I have an untapped resource in my organization that I'm not using well, I think that's the right way to get people to start caring. People need to care about lots of things, but it's a case where everybody wins. A company that thinks about human capital in the right way, everybody wins.  

If you ask me what's my ideal, I want each company in their annual report to also put a component about the state of their human capital.  

A company buys a warehouse, it's an investment. 

A company invests in its employees, it's a cost. The real ideal is to change accounting rules so that investment in human capital is a real investment. We think of it as investment. You can amortize it. You can do all the right things.  

So think about all the HR professionals that you know many. What would get them to start being the guardians of human capital? What do you think is between them and being able to come to the CEO and say, give us the freedom, the ability, the tools to become the guardians of human capital? 

Marissa Geist  

I think that is a really interesting way to phrase it. I think actually probably people that are in HR are thinking they're already the guardians of human capital, but probably more the defenders of human capital where, like you said, it's a reactive battle every day. Let's keep people safe. Let's keep people paid. Let's keep people engaged. And so they're fighting fires and coming from a really reactive space.  

And I actually think there's not a hard business case to take into the CFO. And without that, and without the time and, and frankly, the training to do a business case in a way that the rest of you know, if you're in corporate development, you have to buy a company, you have a whole playbook of how to bring that idea forward, the company knows how to digest that information. It's seen, like you said, they have a way to amortize it. How do you amortize feelings? How do you quantify motivation? How do you monetize engagement?  

We have some measures out there in the market. And I would say every HR individual and I'd say everybody who's employed would agree with what you're saying. If you're happy or you're motivated, you want to do more, you get more out of those companies. Those are the best teams you've worked on. But there's no playbook for companies. And to leave it at the feet of somebody who already has a day job and is trying to create the language and create the tools and the way to have the conversation. I just don't think we're going to get there by accident.  

Dan Ariely  

That's tough. And I'll say something else. I've said some things about HR. I think that the task of learning the relationship what the company does and outcomes instead of stock market return, nobody within the organization can do it. Why? We can't do the right experiments. If you want to, let's say you're doing wine and you want to say, would I sell more at 59 dollars per bottle or 69, you do an AB testing and you have the result.  

In HR, no lawyer will ever let you test anything. So you basically are very, very limited. The reason I love the thing I do right now is I get to look at 1,000 companies. No matter who it is, they can't change enough to basically understand what's working and not working.  

If you say, I want to understand if people would react better to bonuses or a gift, you can't do it. So I think that the kind of data that we're gathering and the effect on stock market return is what every HR professional should take to the C-suite and say, look at the results. 

Here's the evidence. We will never be able to within the organization do a randomized control trial on anything, but here is this.  

So that I think is the first thing, is to recognize that they need the external data. But the second thing I would ask you is to say, where is HR now in the annual report? 

It's basically in the cost section. And I think the question is for HR professionals is to say, how do we get out of the mindset of being in the cost part of the accounting and how do we become an investment? 

Marissa Geist  

The investment. I think the best companies actually do think about their people like that. But it doesn't show up in the annual report that way. It doesn't show up in the this really turned out because we're the best people. There's always another factor that's attributed with that.  

Dan Ariely 

You know, at the end of the day, accounting really, I think the annual reports, the quarterly reports in accounting are the language of business. Here's the task I would love people to do. I would love everybody in HR saying, here is the page I would like on the annual report that would emphasize what we've done on investing in our people. And I want the second page that will make the plan of how we're going to invest in our people better next year.  

Marissa Geist  

It's fascinating. I think there are some points of brilliance on that in terms of how people think about it. Rolls-Royce does a fabulous job of mapping out, here's what's going to make us successful in people. I think they're not linking it to the intrinsic, like you said. They are still at the first level of measurement that's more a proxy versus a predictor. But that is a start. It's a start that it makes the front of the annual report at the front of the annual report and not at the appendix and the 10-Q.  

So hopefully by 2050, we're doing this as a regular practice. And that's how CEOs are motivated because the HR people can do whatever they need to do. But unless the CEO is brave enough to say, I actually believe in this, I'm going to take a risk on it, those will be the first CEOs to move. And then it'll move into the CFO space. I just want to also call it back to say, you mentioned knowledge workers. We're talking about things that sound very nice to have versus need to have. And does this play in a... not a knowledge worker environment, I would imagine it does, but what has your research found if it's not in a privileged environment? 

Dan Ariely  

You're absolutely correct asking this question, and I have to admit that I was biased from the beginning. And this is my shortcoming. I was kind of imagining knowledge workers. I'm an academic. I can see how motivation in my students and staff translates into better things, and I can see how the opposite translates into the opposite. 

But my thinking was kind of limited because I did not have enough experience in these other fields. But for example, there's some really nice data looking at Target versus Walmart and looking at what happened when a customer comes in and something that they're looking for is not on the shelf. And they ask somebody.  

And in one of those companies, I will not tell you which one, they go back, they pretend that they're checking, they don’t, and they come back and say they don't have it. And in the other company, they check. That's human motivation.  

Marissa Geist  

I worked with a, back in my career, even though I'm in professional services, I ended up with a team that was Six Sigma engineers. And one of the very senior, I was a marketer. So when I came to the team, the gentleman looked at me like, what are you doing here? Thank you for this corporate experiment. Who is this person that doesn't know anything about my background? But I wanted to learn. So I was saying, we had to walk some factory floors. How do you know what the engagement's like? And he would say, or I didn't say the engagement. I actually said performance. 

And he said, what I do every time I have to understand the plant before I do anything else, I ask for a walkthrough tour. And on the tour at the beginning, I take a piece of gum out of my pocket. I chew it and I drop the wrapper on the ground. And these are clean manufacturing sites. And he said, if I come back at the end of the tour and the wrapper is still there, I know we have major problems. If I come back at the end of the tour and the wrapper is gone, I know we'll be able to work through it with the people we have. But if that wrapper is still there we have to start at the beginning because nobody here cares about what they're doing. They walk over the wrapper, and that was his way to start at what level, one through 10, of assessment are we at here. And that had nothing to do with the process, the technology, or the scores. It was a wrapper. It was a wrapper.  

Dan Ariely  

Yeah. 

Marissa Geist   

Well, I know that we've covered lots of different topics and your research is fascinating. But before we end, I have a few quick fire questions for you. So are you up for it? You ready? 

Dan Ariely  

You can try, but I'll warn you, I'm a university professor, we're not good at quick anything. 

Marissa Geist  

Quickish, fireish questions. Quickish. Okay, quickish.  

Dan Ariely  

Okay, quickest we can try, yes. 

Marissa Geist 

So would you actually take a pay cut to work someplace that treated you just a little bit better? 

Dan Ariely  

I would. 

I think that people would have in general a hard time doing it, but I think it would make them happier. But I think with what I know, I would be able to override this instinct and do it the right way. 

Marissa Geist  

Good answer, second question. What can you imagine as being normalized as part of work in 2050 like a lunch break or a weekend? Didn't exist a hundred fifty years ago. What will exist in 30 years that it doesn't exist today? 

Dan Ariely  

So one of the things that I am very concerned about is lack of friendship and lack of resilience. We have these trends of not talking about personal things at work anymore. Very tough to talk about romantic life, very tough to talk about politics. But we spend more and more time at work and more and more time with our nuclear family and we have less and less friends. 

I am truly hoping that we will develop a way to have deep friendships at work. It's very, very powerful in startups, not so successful in corporate America, but I think we're losing a lot because of that. And I'm truly hoping that we'll find a way to reignite deep caring relationships between people who work together. 

Marissa Geist  

That is actually proven that if you have a best friend at work, you perform better at work, right? That is important. Okay, so last question actually feeds a little bit into that to say, will the future be more big employer than big state? And will we look to our employers to provide those emotional and health needs that many countries today rely on from the state or their governments to provide? 

Dan Ariely  

You know, my answer is that in an ideal world, I would prefer if the government took more role in this than companies for lots of reasons: partially for mobility, partially because they have a longer term view, they could do things across organizations and so on. I sadly don't see it. 

Marissa Geist  

So it would be easier to have the state have it happen, but more likely that it'll fall to the responsibility of corporations. It is fascinating–we think about Silicon Valley versus European innovation back in the early tech startup days. And the reason that Silicon Valley moved forward is that the average, well, not the only reason, but one of the reasons is the average CEO startup had almost 50 connections, whereas the average European only had two. 

Dan Ariely  

So, Marissa, I know we're doing quick questions, but if I may, I want to ask you two questions. What do you most hope would change in the landscape of work by 2050? Not realistically, but kind of wishful thinking. 

Marissa Geist  

Hmm. 

This is a personal answer for me. I have four boys and I hope that work is set up to be more equal across the expectations of what you bring to work, what you do in life, because I think there are a lot of things that right now sort of bring us back to old practices and take away from people being able to use their full talents on both sides, just the way the work is set up and the expectations. So I hope that the way that we've set up how we engage with work and life and families is more equitable and we've gotten over some of these silly barriers that still exist inexplicably in the way we work. 

Dan Ariely  

So that's wishful thinking. And what about, in reality, what do you think is actually going to happen? Not necessarily about this, but if you think about the real change that will happen by 2050, what do you think is the biggest real change that will happen? 

Marissa Geist  

I hope the biggest real change will be this lack of expectation of a linear career and some reset on the agreement between employers and employees about what your experience looks like, what your skill looks like, your mentoring relationships with people that have been there, intellectual generosity, and that we have at least some way and some acceptance to account for people's experience that doesn't look like, I've had this job, I've had this career ladder, and at least we have time for breaks, sabbaticals, mobility in the workplace and can digest that and can appreciate it and reward it, not just tolerate it. 

Dan Ariely  

That's very, very lovely.  

But there's one other thing that I wanted to mention.  

I've been thinking a lot about neurodiversity. We did a large study in a consulting company and we asked what percentage of people, we asked people if they have been diagnosed officially with some neurodiversity anywhere from ADHD to autism. And then we asked people if you were not diagnosed, do you think if you went to a doctor you would get diagnosed with something? And 25% of the people said they were diagnosed and 27% said they would be diagnosed if they went.  

It's about half the people have or think they have something. And those people were less happy at the workplace.  

People with depression, people who are bipolar, we have lots of variability. 

And we haven't taken advantage of that. We've actually not created accommodation for that. And I really hope that this will happen. I think that we need to acknowledge, destigmatize, and then help people reach their potential. When we create teams with different skills, when we give people different responsibility and so on, I hope that this will be the next stage. And I can see that happening, actually. That one is one that I can really see happening. 

Marissa Geist  

I can definitely see that happening. I think it has language in the workplace. I think it has language for the people that are affected by it now.  

It's, of course, everyone's personal choice of how much they show at work, but I definitely see most of the companies we work with at least normalizing the conversation to be able to have it, which has to at least feel a little bit less lonely to your point about not having friends at work and not feeling connection.  

That's actually part of your identity at work.  

That to me is more near term. That's not even aspirational. That should be expectation by like 2030. We should have some real support and accommodation for people that are struggling and then a better way to plug them into business. I think it'll just happen because we have more decision makers, more people in leadership roles who hopefully will be successful through these conversations today in five and 10 years, actually leading the way.  

And it’ll become second nature.  

Well Dan, we’ve covered a lot of ground here. 

My takeaways are that there is clear evidence that intrinsic motivations are the key to unlocking the next level of motivation and productivity in our workforce.  

The imperative is there, but what we really need to focus on NOW is in building the business vocabulary to have these discussions and to make a business case. 

And certainly we have a long way to go in learning how to address these intrinsic concerns as employers.  

But without a doubt, the companies who will be winning in 2050 are the ones who are working on these problems TODAY.    

So, Dan, thank you so much for joining us on the show. It’s been a pleasure to speak with you.  

Dan Ariely  

Same here. 

Marissa Geist 

Join me next time on the trip to work 2050 in The Talent Time Machine.  

To catch the next episode or hear from my previous guests, be sure to follow us on your favorite podcast platform.  

This episode was edited by Emily Kaysinger and produced by Dusty Weis at Podcamp Media... with the support of Sarah Smelik, John McCarron and Laura Pykett of Heavenly and the team at Cielo of Sally Hunter, Annamarie Andrews and Susie Schuppel-Paul.  

For Cielo, thanks for listening... I'm Marissa Geist.