How to Overcome Financial Compensation Bias
Money isn’t everything. No, seriously, it isn’t – Issue #34
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My youngest son recently had a birthday, and I was able to spend the day with him. For many years, when my children had birthdays, I was lucky if I saw them in the morning before I left for work.
I tried really hard to leave early (i.e., 5 PM) to be home for their birthday dinners. However, the nightmare traffic in the Bay Area often sabotaged that plan.
Now, my new business gives me 10x the freedom of my old corporate jobs. I get to celebrate their birthdays with them from morning until night. I may do some work in the margins on my phone, but I’m with them for the first time in many years. I hope that it isn’t too late. I hope they remember it and value our time together.
I was thinking back on my childhood birthdays and trying to remember the gifts. I can only remember two, and both were free.
A friend brought me a puppy from their recent litter
My father took me fishing early in the morning on my birthday
Of course, I remembered the puppy. How could I not? Puppy!
The time with my father was special because it was rare. There were four siblings in my family, and he worked a lot to support us. I didn’t get to spend much time alone with him. So, I’ll never forget that morning.
The best things in life can’t be purchased.
However, people only seem to value what they pay for
Paradoxically, people seem to forget the big picture of their past experiences when things of value are offered to them. If that thing has a clear price tag associated with it, people seem to value it more. No matter how great free things are, most people will dismiss them.
I’ve had some insightful experiences with this. When we moved a couple of years ago, I wanted to get rid of many things we no longer needed. I sold some, but that is tedious. We ended up donating and giving away much more.
Oddly enough, I couldn’t seem to get rid of some of the free items, even when they were virtually new and were obviously useful. I decided to test something. I reposted them for a price and boom, people came and got them.
When Ramit Sethi first started his business, he found that people didn’t value his free advice. He was giving it away to help people, and they didn’t even bother to access it. So, he started charging, and then people made sure to get their money’s worth.
“People value what they pay for. This sounds so obvious, but I didn’t internalize it until this happened over and over again. I gave them a $2,000 course for free, they didn’t even log in ONCE.”
I understand this on some level. Price may be an indicator of quality and value. There are certainly free things that aren’t worth your time. Or, free things come with a catch.
So, perhaps we’ve all become jaded?
However, I’ve also discovered that many free things and interactions are worth their weight in gold. It does take some trust. You do need to learn to recognize the red flags to avoid the crap. Yet, I have been rewarded with this renewed trust.
Also, some things of great value cannot be purchased. Those things are often worth more than you would ever imagine.
People overvalue financial compensation
You’ll see this same bias when people consider job opportunities. So many fixate on financial compensation. They’ll meticulously compare base salaries, signing bonuses, stock options, projected values of the companies, etc.
They weight the money much more heavily than the other factors in their decision-making process.
However, money is just one part of the equation. The role, team, experience, network you develop, brand halo effect, etc. are all free things that come with a great job. They can put your career on a completely different trajectory.
I worked at Apple Computer over 20 years ago. When I meet people, and they find out that I worked there, many still say, “Wow! You worked at Apple? What was that like?!”
I’m sure that Apple wasn’t the highest-paying job offer at the time, and some people told me that Apple was dying and that I was making a terrible decision. But, the halo effect of working there has been invaluable for me.
Take the PayPal mafia as another example. If you had worked there, became trusted friends with the first 50 employees, and joined various founders in their next ventures, you would have become a millionaire many times over. You’d have become friends with folks such as:
Elon Musk — co-founder of Tesla and SpaceX
David Sacks — founder of Yammer
Steve Chen — co-founder of YouTube
Chad Hurley — co-founder of YouTube
Reid Hoffman — founder of LinkedIn
Jeremy Stoppelman — co-founder of Yelp
Yishan Wong — CEO of Reddit
Your scene — as James Altucher calls it — is one of the biggest predictors of your success. What you learn, where you develop your expertise, and whom you know can all raise you up — or drag you down.
My personal example
Many years ago, I faced a choice between jobs at Google and Yahoo. Financially speaking, Google would have easily been the better choice. However, at Yahoo, I had a chance to develop into the kind of leader I would never have become at Google.
Yahoo invested in me, my leadership development with multiple coaches, my public speaking skills, media training, and more. That experience allowed me to expand way beyond my comfort zone in Design when I became the VP of Consumer Products for Search.
At Google, I would have made more money, but I would have been buried deep in their management structure. I would have been working on a less critical and less visible product.
Ironically, the chaos of Yahoo spawned more opportunities for me.
Overcome this bias
Once you are aware of bias, it becomes easier to recognize and overcome it. You can use tools that help you think more broadly than monetary compensation when you are faced with new opportunities.
You can also learn to recognize when something of value is being offered to you for free, and stop turning up your nose at it.
I’ve created a simple spreadsheet that I used for myself — and now with my clients — to compare job opportunities. You can download it for free for the next 3 days instead of paying $7, so get it now.
Hmmm, free. Maybe now you won’t value it? No worries, it will no longer be free next week.
It includes the basics such as salary, bonus, and stock. But, it also includes several other vital factors such as:
Your level and title
What the actual role will be
The team you will work with
Politics in the organization (and company)
Your manager, and manager’s manager
The C-level executives at the company
The corporate mission
The corporate culture
Diversity and inclusion
Career path
Learning opportunities
Etc, etc, etc.
Feel free to modify those factors as desired for what matters the most to you. Enjoy!
What I’ve been reading and writing
If you are one of my paid subscribers, don’t forget to check out my new tips for sharing on LinkedIn and why you should take care of others. You may have missed my announcement, but I will now be sharing quick daily career tips that you can immediately apply to your working life. You will start receiving these daily tips when you upgrade your subscriber account.
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