Motivation is often seen as the key to success—whether it’s the motivation to work harder, study longer, or be a better person. Many believe that the more you incentivize, the more people will perform. But what if money isn’t the magic key that unlocks true motivation? What if, in certain situations, introducing financial rewards can diminish motivation instead of enhancing it? This concept, known as motivation crowding, highlights the surprising ways monetary incentives can backfire and undermine our best intentions.

The Story of a Friend’s Fragile Antiques

Moving from one home to another is always stressful, but when you’re moving to a bustling metropolis like Paris, the anxiety can multiply. A close friend from Annecy found himself in this situation not long ago. Along with his other possessions, he owned a unique collection of antiques, many passed down from generations. Among these treasures were rare hand-blown Murano glasses, famous for their craftsmanship, and an assortment of old, leather-bound books with cultural and sentimental value.

Knowing his deep connection to these items, I could imagine how hard it would be for him to trust them to the moving company. Moving fragile, irreplaceable belongings—items that weren’t just valuable but emotionally significant—can cause immense anxiety. For him, it wasn’t just about the physical act of moving; it was about ensuring the items were taken care of properly, as they symbolized more than mere decoration or wealth—they were part of his family’s history.

During my last visit before his move, I offered to carry the most delicate items back to Paris, where I lived. I didn’t expect compensation; I simply wanted to help as a friend, knowing it would give him peace of mind. Two weeks later, I received a thank-you letter. Along with the note, there was a $50 bill. At first, I was touched by the gesture, but then, it made me uncomfortable.

While I was happy to have helped, the introduction of money changed the dynamic of the interaction. What was initially an act of friendship, based on a deep sense of trust and goodwill, became transactional. The simple favor I had offered as a friend was now tainted by the notion of being “paid” for my kindness. Though the amount itself wasn’t large, the principle was what mattered—the gesture, no longer purely philanthropic, had been undermined by financial compensation. Instead of the unspoken connection between two friends, it now felt like our interaction had become more about exchange than genuine care. This story highlights how even small financial incentives can distort what would otherwise be a naturally motivated action, turning it into something transactional.

The Swiss Nuclear Repository: A Lesson in Community and Bribes

Switzerland, known for its picturesque landscapes and progressive policies, faced a significant dilemma for years: where to store its radioactive waste. Being cautious and responsible, the nation needed to find a location for this dangerous material. The government and experts in the field examined multiple sites across the country, considering each location’s geological stability, environmental impact, and social implications. Wolfenschiessen, a small village in the Swiss Alps, was one such location under consideration.

To gauge public opinion, economist Bruno Frey and his colleagues at the University of Zurich surveyed the residents. To their surprise, the responses were overwhelmingly positive. Approximately 50.8% of the villagers supported the proposal to store the nuclear waste beneath their community. The reasons for their support were varied: national pride, the belief in contributing to a larger cause, a sense of civic duty, and even the hope that it would bring new jobs to the area. Non-financial, intrinsic motivations fueled this support. The villagers felt they were doing something important for the nation which would benefit everyone in the long run.

However, Frey and his team decided to repeat the survey with a significant modification: they introduced a hypothetical monetary reward. If the villagers agreed to the proposal, they would receive a $5,000 reward, paid by Swiss taxpayers. The results were dramatic. Only 24.6% of the villagers were now willing to endorse the proposal. This stark contrast in support demonstrates the profound effect that introducing financial incentives can have on decision-making processes.

Although it may have seemed like an attempt to encourage support, the financial reward was perceived as a bribe. What had once been a civic, community-driven decision became a financial transaction. The villagers began to view their decision differently: as a personal, monetary gain rather than a collective, altruistic one. The introduction of money reduced the number of people willing to support the project and diluted the sense of shared purpose and national pride that had initially motivated the residents. This shift in attitude underscores the danger of using financial incentives to encourage behavior previously driven by intrinsic, community-centered values.

The Daycare Dilemma: How Money Can Encourage Bad Behavior

Many parents and daycare centers are familiar with the issue of tardy parents picking up their children late. Daycare workers responsible for the children until they are safely picked up are often left in a difficult position. They cannot simply send the children off alone or abandon them on the street, but staying late and continuing to watch the children means additional work for the staff without any extra pay or recognition.

Many daycare centers have implemented late fees to counteract this issue—penalties for parents who fail to pick up their children on time. On the surface, this seems like a reasonable solution. The fee is meant to discourage delay by creating a financial incentive for parents to be punctual. However, research has shown that this approach can sometimes have the opposite effect. Instead of curbing late pick-ups, the imposition of a fee can lead to an increase in tardiness.

How does this happen? When parents are late, they are typically required to pay a fee for the extra time the staff spends looking after their children. What this creates, in effect, is a transaction. Parents may start to view the lateness fee not as a penalty but as a cost of doing business. Instead of feeling guilty or responsible for being late, they see the fee as just another expense—much like paying for parking or a late library book. In essence, the monetary penalty becomes an accepted part of the equation, and the social expectations of punctuality are diminished.

The problem is that the introduction of money turns the situation into a financial transaction rather than a social one. Based on mutual respect and consideration, what was once a personal interaction between the parents and the daycare workers becomes an exchange of services and fees. Instead of motivating better behavior, the late fee legitimizes the bad behavior by providing a way for parents to “pay off” their tardiness. It shifts the focus away from the value of respecting other people’s time to simply paying for the convenience of being late. This is a textbook example of motivation crowding, where extrinsic incentives replace intrinsic motivations and fail to achieve the desired outcome.

The Theory of Motivation Crowding

Motivation crowding is the theory that external incentives, particularly financial ones, can diminish or even replace intrinsic motivation—the personal drive to engage in an activity for its own sake. When someone is motivated by an internal desire, such as the satisfaction of helping others or the joy of creative expression, external rewards can distort these natural motivations. Motivation crowding explains why this shift happens and why sometimes financial rewards reduce performance, creativity, or social responsibility.

The idea is simple: when people engage in an activity because they find it meaningful or fulfilling, introducing external rewards can undermine that internal motivation. For example, consider someone who volunteers for a cause they deeply care about, such as helping the homeless or working with underprivileged children. This person is driven by intrinsic factors—empathy, a desire to make a positive difference, and a commitment to a cause. However, if this person is suddenly offered a financial reward for every work hour, their motivations may change. Instead of continuing to work for the fulfillment that comes from helping others, they may begin to focus solely on earning money. The intrinsic joy of contributing to a cause diminishes, and the work becomes just another job to earn a paycheck.

This phenomenon also occurs in the workplace. Imagine a non-profit organization where employees are initially motivated by the organization’s mission—helping those in need and making a difference in the world. Employees may shift their focus if the organization introduces performance-based bonuses or financial rewards for securing donations. Instead of working toward the broader mission, they may concentrate solely on the actions that bring in the most money, such as chasing down donors. While the employees might still be working hard, the intrinsic motivation to help others and make a positive impact is crowded out by the extrinsic motivation to earn a bonus. This change in focus can erode creativity, passion, and the overall sense of purpose that initially drove the employees.

Who is Safe from Motivation Crowding?

The concept of motivation crowding doesn’t apply to every industry or job. Some roles, particularly those in fields where the work is primarily transactional, are less likely to be affected by financial incentives. For example, jobs in banking, insurance, or financial auditing often involve uninspiring and purely functional tasks. In these industries, employees may not have a deep personal connection to their work or the products they create. In such cases, performance bonuses or financial incentives often motivate employees to meet targets, as they align with the primary motivation of earning money.

On the other hand, in fields where a sense of purpose or passion drives employees, financial incentives can often backfire. Start-ups, creative industries, and non-profit organizations are all examples where intrinsic motivations, such as a belief in the company’s mission or the joy of creating something new, are central to the work. In these cases, financial incentives are less likely to improve performance and can undermine the enthusiasm and creativity that employees bring to their roles. For start-ups, passion and belief in the company’s mission are often the driving forces behind employees’ productivity and commitment. Suppose employees are motivated primarily by financial rewards. In that case, the company’s mission and vision may become secondary, losing the innovative spirit crucial for a start-up’s success.

Teaching Your Children Without Money

Motivation crowding is a particularly pertinent issue when it comes to raising children. Parents often face the challenge of getting their children to complete tasks like doing homework, practicing music, or even doing chores around the house. The temptation is to offer a reward or an allowance in exchange for these activities. While it may seem simple to motivate kids, offering money for every task can backfire.

When children are paid for every little thing they do, they start to view tasks like homework or household chores as things that must be “bought.” The intrinsic value of these activities—learning, growing, contributing to the family—is lost in favor of a more transactional view. Children might refuse to do their homework or mow the lawn unless compensated with money, reinforcing the idea that they should only work when paid. This reduces the opportunity for children to learn responsibility, the value of work, and the satisfaction of doing something simply because it needs to be done.

Instead, a more effective approach is to provide children with a fixed weekly allowance, regardless of the tasks they complete. This allows them to learn the value of managing money and the responsibility of budgeting without tying every action to a financial reward. Children are encouraged to develop a sense of responsibility, independence, and personal achievement by removing money as a direct motivator for every task. These intrinsic motivations will serve them well beyond childhood and into adulthood.

Conclusion

The phenomenon of motivation crowding highlights the intricacies of human motivation and challenges the widely held belief that money is the ultimate motivator. From acts of kindness to societal decision-making and parenting, motivation crowding reminds us that non-monetary incentives play a significant role in driving behavior. Understanding the delicate balance between intrinsic motivations and financial rewards is crucial in various contexts, whether in the workplace, community engagement, or personal relationships. By recognizing the potential crowding effects, we can make more informed decisions and foster environments that promote genuine motivation and engagement.

This article is part of The Art of Thinking Clearly Series based on Rolf Dobelli’s book.