Wednesday, May 13, 2009

The wisdom of setting goals

Another interesting read on the debate over the importance of setting goals. An interesting excerpt:
One seminal economics study even argued that the difficulty of finding a cab on a rainy day can be blamed on the personal goals of cabbies. The 1997 paper found that cab drivers tend to have a set amount of money they aim to make every day. When it's raining they hit that target faster, since more people want cabs, so the cabbies quit earlier in the day. This narrow focus on a goal hurts everybody in the system - it shrinks the taxi supply just when demand is highest, leaving more people standing on the curb getting wet, and it hurts the cabbies themselves, who miss a chance to maximize their income on their most lucrative days.

I thought this article was interesting due to the fact that it showed the pros and cons of goal setting. I think setting goals usually have a pro effect.

According to the book "Think and Grow Rich" written by Napoleon Hill, the method by which the DESIRE for riches can be transmuted into its financial equivalent, consist of 6 definite, practical steps.

1) Fix in your mind the exact amount of money you desire
2) Determine exactly what you intend to give in return for the money you desire. (There is no such reality as "something for nothing")
3) Establish a definite date when you intend to possess the money you desire
4) Create a definite plan for carrying out your desire, and begin at once.
5) Write out a clear, concise statement of the amount of money you intend to acquire, name the time limit for its acquisition, state what you intend to give in return for the money, and describe clearly the plan through which you intend to accumulate it.
6) Read you written statement aloud, twice daily, once before you sleep and once after you awake in the morning.

Setting just a goal isn't enough. You need to act upon your goals you have set. I like to set my goals very high.
I would have thought that the cab drivers would have taken into account the fact that it is much more difficult to make their earnings quota on days with nicer weather and stuck around on days with horrible weather in order to make more money that they could in turn, save to help compensate for the days that they aren't able to reach their quota. As a result they would not have to work longer than normal days on days that are pleasant.
Couldn't the company the cab drivers work for rework their system. Instead of having just a goal for the drivers to reach, why not pay them based on performance, so that by working more they will get more benefit for themselves. This means that a day where more people are looking for a cab ride, they would have incentive to try to maximize the number of passengers on these days in order to maximize their paychecks.
I think that while it's important to have goals, it is even more important how you choose those goals and how realistic they are. I think to some degree, having an almost impossible goal that you are trying to achieve can be a bad thing. If a person were to continuously set new, extremely difficult to achieve goals, and fail at them constantly, wouldn't that person soon give-up on the idea of goal setting? For most people, becoming the president of the United States is a goal that has a very small probability of being achieved. Likewise, for every one person that achieved their goal of becoming a professional athlete, there are tens of thousands of people that have dedicated their life to the same goal, but failed. Is there some satisfaction for these people in knowing that they've tried their hardest and done everything they can? Sure. But, at the same time they may get the feeling that they've wasted their lives pursuing a goal that could not be achieved no matter what they did.
On the other hand, there are people who set goals that are far too easy to achieve, never really challenge themselves and end up not maximizing their true potential in whatever it is they are doing. This is why setting realistic goals that are challenging but realistic is so important.
Very interesting to read an article that actually shows how goals can be negative. I have never seen nor heard of such a thing but it seems to make a lot of sense.
While the taxi driver excerpt certainly describes an immediate negative impact of goal setting, perhaps the more important lesson behind this article has to do with the path rather than the goal.

There is a common morality lesson to be learned here; something that most people were introduced to sometime in their lives but might have forgotten: it's not where you're going that matters, but how you get there.

An example of an application of this would be with the subject of war; some describe war as completely justified as a means to an end, that end being peace. It is something that can be considered as necessary to bridge the gap between differences in ideas and cultures. An alternative to this could be non-violent forms of dissent. What makes an individual choose one path towards the goal of peace over another? If the benefits from a specific goal outweigh the costs from taking a specific path, than committing acts that would normally be deemed as immoral becomes acceptable. If however, the costs from that same path (to clarify, assuming it is murder from war), outweigh the benefits of peace, than an alternative path would be sought out. In this example, the paths are clearly divided on different sides of a clear moral line, killing and not killing.

Specifically for taxi drivers, however, it is a decision that is much smaller in scale, and thus much easier to be "immoral" about. Though it is very difficult to divide the decision taxi drivers face on a rainy day into morally right and wrong choices, I will try. The goal of any job is to earn money. During rainy days, this goal becomes easier to accomplish, and even surpass. Assuming that the goal of earning money is long-term, and the meager earnings from a single day can never accomplish that goal, there should be no reason why a taxi driver would not take advantage of the increased business on a rainy day in hopes of earning more money in the long-run. So, the "moral" and perhaps more sensible decision is to work on rainy days. The "immoral" decision, on the other hand, would then be laziness or acceptance of mediocre performance in the face of the potential to earn more.
This is obviously a poor system for a couple of reasons:

1.) If all drivers meet a quota, then it will be impossible to tell who the better drivers are.

2.) If all drivers meet a quota, the profits will remain stagnant and no surprise profits could be lowered. Sure the system doesn't allow for losses, but it doesn't exactly yield itself to future growth.

In this case, I don't think goals necessarily are negative, I think this is just a classic case of bad goal setting. Better goal setting would be to set really high goals with the expectation that only the best can reach them. Then reward accordingly. Those who don't meet goals would stand out and could be further examined.
This seems ridiculous to me. If more people are willing to pay for cabs when it is raining why would a cab driver stop working when they could make more money faster then a dry day. I think it is due to the fact that the cab drivers settle for mediocracy since it is not not a very prestige job. I would think that most cabbies are probable not college educated and only have a high school degree. If i were a cabbie I would maximize my profits on the days when it is raining because on days when it is nice it will be more difficult to meet the qouta.
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Setting a goal is good. However, for the taxi’s example, I think different country might be different. As in Hong Kong, everyone try to maximize their income, even if they earn till they reach their goal. They wouldn’t quit, they will continue and maximize their profit as much as possible. So in this case, they should set their income into weekly or monthly, so that during the sunny day, they might be not able to reach their goal. So that, during the raining day, they have to make up for what they can’t make up during the sunny day. Or are there other factors that make the taxi to quit such as the road is too dangerous to drive?
I've never thought of these cases. Cab companies probably setting their goals just one case. Setting goals are very important for people to motivate working but if those companies set bonuses, drivers motivations will dramatically change.
So, sometimes a commission system should use these jobs.
It seems absurd that any person would deny the chance of making easy money. Why stop at the minimum when there is an opportunity to make so much more? Reaching a goal is fantastic, but surpassing it is even greater.
I think the study fails to mention whether or not the taxi driver owns the taxi or drives a taxi owned by a company. Most would probably belong to the latter so of course when a driver meets the daily quota he calls it a day. However, if the driver owns the taxi then the incentive is to pick up as many customers as possible. As far as goal setting is concerned if GM was not flexible enough to change goals or simply not aware they set the wrong goal no wonder they are going bankrupt! Also, I think its important and obvious but obviously overlooked to set realistic goals!
The key distinction which makes the cabbies' goal setting negative is their personal propensity toward ambition. Someone who chooses the occupation of cab driver could likely have a mentality of minimum sustainability rather than wealth accumulation. As a result of this characteristic, a cab driver may only focus on short term necessities (rent, bills, food, etc) rather than saving for future consideration.
this article brings up the interesting point of the negative side of goals and how they can in some situations focus you on the wrong things. Which absolutely makes sense even though i never thought being more focused could be a bad thing, however it all comes down to how you go about deciding what goals are going to result in the best outcomes. When i make goals i try and lay out all the outcomes and also try and identify all the things that can lead to my desired outcome, but after reading his article i will now also try and consider possible consequences that my goals may have.
This article represents a lesson that should be learned by all Americans. Just because you have set your mind to accomplishing something, it will not simply just happen. It shows that setting a goal and taking shortcuts to achieving that goal, like General Motors did, will have a very negative effect. A goal must be well thought-out and it has to be possible! There needs to be some kind of tangible reasoning behind the goal. If the goal is properly made and carried out, a pareto effect will be enabled and everyone will be happy.
While i personally believe setting goals is a great skill to have and helps me organize and stabilize my life, in the example of the ca drivers it seems like the analysis is missing the point. These cab drivers set a goal which does not change along with the weather, its possible that these cab drivers value their leisure time well above that in which they could gain by staying out additional hours. it seems to me that the goal they set fits with what kind of income they need to generate and they value their time off more than a few additional fairs and with the weather being bad, and driving in the rain can cause much more unwanted stress.
Personally I would want to work maximum amount of hours possibly on rainy days, therefore I could play during the sunny days. Especially because the value of my leisure is greater when it is sunny out rather than when its raining. This would seem like a no brainer, but I guess if you only have short term financial incentives this punishes you, like it should.
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