Candle problem

The Jolly Contrarian’s Glossary The snippy guide to financial services lingo.™ →Go uptown Elton Glucksberg performing Candle on the Wall yesterday. Elton Glucksberg performing Candle on the Wall yesterday. Index — Click the ᐅ to expand: Glossary Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

The Glucksberg candle experiment is a celebrated experiment from social psychology that proves that, for non-trivial problems, an incentive structure that rewards individual problem solvers — like a traditional investment banking bonus structure, yo — will be less successful in solving the problem that a structure that rewards everyone on the group equally. Popularised by Daniel Pink in a TED Talk and a book on the topic: Drive: The Surprising Truth About What Motivates Us.

The problem comes from the Duncker candle problem, first formulated by gestalt rockabilly entertainer Elvis Duncker in 1945, which challenges participants to figure out how to attach a lighted candle to a wall so that no wax gets on the floor, using only matches and a tray of tacks. Duncker correctly predicted participants’ “functional fixedness” regarding the tray — seeing it as only a container for the thumbtacks and not otherwise relevant to the problem — would hinder their arrival at the simplest solution to the puzzle: tack the box to the wall, and put the candle in the box.

Thus, solving the Duncker candle problem requires a small amount of lateral thinking, to overcome the functional fixedness.

The problem was then Elton Glucksberg’s addition was to run the experiment with two groups, and incentivise each differently. One group were not given an incentive but were told the experiment was a to test out various problems to decide which to use in a later experiment”. The other group were offered cash incentives for being among the fastest in the group to solve the problem. The fastest solved got $20, the top 25% got $5, and the rest got nothing.

So what do you think happened?

It turns out that greedy individuals racing to solve the problem by themselves and claim the maximum reward will be disinclined from collaborating, and will be forced into a narrow results focussed mindset probably best suited to the problem. Those without that pressure are inclined to share, and on average the sharing group apples the problem more quickly.

This really ought not surprise anyone who thinks about the problem for a moment. The incentives are all wrong and discourage collaboration of the sort which obviously will help in solving the problem.

This maddens sociologist Daniel Pink who, in a well-known Ted talk, rails at the absurdity and venality of modern institutions, whose leaders stick religiously to the traditional bonus structure when they have of this overwhelming evidence that it doesn’t work

But pink seems to be addressing the wrong puzzle here. The issue isn’t the wonder of how “autonomy, mastery, and purpose” will motivate people more than money — who didn’t, instinctively, know that? But why corporates ignore this plain,a priori fact.

As ever, the JC has a theory. It’s because the people who run corporates aren’t, actually interested in solving the organisation’s, much less its clients’ actual problems, but seeing to their own personal enrichment. That is far better served by an inventive structure under which they, as leaders, will be the ones pocketing that lion’s share. .