Start Up Blog

Economic irrationalist

Posted in entrepreneurship by Steve Sammartino on April 16, 2010

Lately I’ve been making a few decisions which are economically irrational. Making decisions which are, on the face of it, financially inept.

For example, I starting to feel a sense of loyalty to my chief technology officer for rentoid.com

He’s not the cheapest and he’s not the best. Probably somewhere in the middle for both. I could probably get someone cheaper with similar skills, or better for the same price. But I don’t. In fact I tell him that I’m loyal to him. A large part of why I want  to succeed so that he can succeed also, to share it with him. Even though he has not risked the capital, or the time that I have on the project.

Why would I act this way. Well I like working with him. He’s a nice guy, and sometimes that’s enough.

I guess you could call me an Economic Irrrationalist. And it just feels right.

7 Responses

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  1. Ben Rowe said, on April 16, 2010 at 9:11 pm

    Yeah! I agree – you get just as much pleasure making people happy, making them them feel secure and loved – just as much as turning a profit.

    But hey – I think economic irrationalism encapsulates much more than just loyal employees. The world should think more about economic irrationality.

    Take, for example, economic growth itself. Our whole economic system is based on economic growth. But we know that GDP is hogwash. It includes negative growth, like increased spending on jails, depression research and coal plant revenue. And despite material growth gains, economic growth does not equate to happiness. The whole thing is rubbish.

    If we started doing things DESPITE the economic benefits, we’d probably all be better off.

    Nice post fella.

  2. savendar said, on April 16, 2010 at 10:34 pm

    I wonder if your CTO friend reads this blog?

    Anyway, there is no reason to believe economic rationality can only involve questions of dollars and cents. The whole point of work is not to earn income, it’s to earn leisure. We work so we can be happy. Given your assumption, charity would always be irrational, as an example. People act for many reasons. In fact, for most people a desire to pursue happiness has a greater influence on decisions than a desire to increase future income. So I would argue this simply makes you human.

    • Steve Sammartino said, on April 16, 2010 at 10:40 pm

      Yes, he does read this blog. And he is ware of my opinion in these matters.

      The whole purpose of the blog entry is exactly your thoughts. To bring light to economics being broader than finance, and the emrbace the emotional side of human existence, not just outside of work, but in it.

      Thanks for the great comment.
      Steve.

  3. Andre Sammartino said, on April 19, 2010 at 10:11 am

    You’re pointing the finger at the wrong discipline here Stevie. Economics doesn’t say “consider costs only”… that’d be accounting. Economics says that we should weigh up utility versus costs. Your warm gooey feelings about keeping your CTO around is utility… so you aren’t doing anything economically irrational.

  4. Josh Moore said, on April 21, 2010 at 7:07 pm

    What about Henry Ford? He used to pay his employees double the standard salary as he knew he would make his money back by avoiding union disputes, retraining staff, hiring, firing, disputes in court, etc.

    Makes perfect economic sense to me Steve :)

    I would take it one step further. If your CTO friend and you both want to continue growing perhaps you help create some situation for him where he gets ongoing dividends for his work? For example, maybe if he gives you a good deal you could refer him to other potential clients in your Start Up School…

    People tend to get that entrepreneurship is not a competition, we are all in it together. Even competitors can have unique attributes and find a way to complement each other.

    Just my two cents.

    JM :)

    • Steve Sammartino said, on April 22, 2010 at 1:32 am

      Yep – in fact we have something in place to reward him (Vasilii) by being involved in the project. I also liked Andre’s point that economics includes social parameters as well as financial ones.

      I think they key thing I was trying to communicate was that the I like to make decisions that are not purely financial even if the cost is greater, because my value system is more important than my wallet.

      Steve.

      • Josh Moore said, on April 22, 2010 at 8:42 am

        Values are definitely more important than your wallet.

        If all someone cared about was money they would have no hesitation in stealing it. Luckily, value systems prevent most people from this kind of behaviour.

        Also a concern and vested interest in people helps you to make these decisions. I invest lots of my time in my friends, family and colleagues, etc. These relationships have the potential to pay more dividends than other investments I could make.
        :)


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