6. How Many Months on Average Between the Last Fed Hike in Cycle and the First Cut Thereafter
Jim Reid Deutsche Bank I’ve done a lot of thinking recently as to whether the market has been crazy or not after the SVB collapse to price in imminent Fed cuts when the hiking cycle hasn’t yet officially finished. The reality is that the market probably got ahead of itself in the immediate aftermath, but more recently has been closer to being in line with history.
Today’s CoTD shows (in order) how many months there were between the last Fed hike in a cycle and the first cut thereafter. There is quite a wide bid-offer and every cycle is different, but the average gap is around 6 months, with the median 4 months. So if May was the last hike then median/average history would take us to September/October. Given the first cut is now fully priced by the November meeting (no meeting in October) it’s hard to criticise too heavily. DB think it’ll be in Q1 2024.
Of the 13 Fed cycles we’ve analysed here the annotated numbers on the graph show that 5 first cuts occurred when the recession had already started. A further two within 3 months. 2 more saw the recession start 6-7 months later, 1 more 11 months later and 3 outliers where the recession only started 33-69 months later.So most but not all (7/13) saw the first cut occur within 3 months of the subsequent recession.
Given where inflation currently is it’s hard to see the Fed cutting without a recession being imminent or obvious to them. Although that’s not the case at the moment, given the house view of it starting in Q4 we are probably in the right ball park for pricing in the first cut even if you could argue over the finer details.
7. U.S. Government Interest Expense is Now Annualized $929 Billion.
8. Global Supply Chain Pressure Record High to Record Low in One Year
We’ve all been there. That meeting you’ve scheduled 30 minutes for is now taking three hours. When you’ve finally called it a day, you’re still left without the answers you need. Your staff are left frustrated, your team deflated. What went wrong?
While mandatory to the company, meetings can quickly take a turn for the worst. Given the approach, it’s no wonder. Locking everyone in a room and buckling down until issues are solved is hardly an environment to garner innovation and camaraderie.
It also doesn’t help when the person in charge is making things worse. If you’re ever left scratching your head wondering why things turned sour, it’s time for some self-reflection.
Here are five signs that you’re likely the culprit of a good meeting gone wrong:
1. You use nicknames.
You may not think twice about it, but referring to a colleague as ‘man’, ‘bro’, ‘girl’, or ‘dude’ creates an issue. Not everyone interprets nicknames as a term of endearment. Some may feel it’s demeaning, while others may feel like you’re playing favorites.
Instead of navigating which nicknames are okay and which are not, do yourself a favor and just avoid the issue all together. Call someone by their first name. It’s that simple. I’m all for casual offices, but there is a level of professionalism that you need to maintain.
2. You play the blame game.
This can go two ways. You’re either blaming one person, or you’re taking all of the blame. We have a tendency as leaders to assume that if anything goes wrong, we need to point the finger. Even if it’s at ourselves.
To create a culture that’s continually innovating and connected, never single out someone or something as the culprit. Just watch any professional sports team; when they lose, they don’t blame the referee or another player. They win as a team and they lose as a team. Treat yours the same way.
3. You put people on the spot.
We all know that feeling when the teacher called your name, followed by the entire class staring at you. Even if you knew the answer, the pressure of being put on the spot makes your mind foggy and your anxiety levels high.
Why would you want to put someone through the same torture? It’s a common misconception that leaders have to keep employees on their toes to ensure they’re always prepared. But if you’ve hired right and are offering meaningful work, then this should never be an issue.
4. You shut down bad ideas.
This can seem like a no-brainer, but before you plead not guilty, chances are you’ve been an offender without even realizing it.
There are many ways we can dismiss ideas that aren’t worth developing. Your body language and facial expressions can play a big part. Snickers, eye rolls, furrowed brows, or pretending like you never heard them are all examples of how you’re telling the person (and your team) that their idea is not just bad, but not worth your time.
While no one’s asking you to sugarcoat the truth or analyze every idea that hits the table, the key is to celebrate the fact that ideas are coming forward at all. So treat every single one with consideration and respect. Otherwise, you’ll stop getting them.
5. You ‘but’ in.
“I thought you did a great job, but…”
As soon as you say those three little letters, you’ve ruined whatever came before it. If you have critical feedback to give, then give it without spinning it from a positive. Employees will appreciate you telling it like it is.
Stay away from loaded sentences. You’re only creating scenarios that are over analyzed and highly agonized.
1. Jeremy Schwartz at Wisdom Tree Answer to Yesterday’s Top 10 Opener.
Expanded tech is the the old tech classifications before S&P carved it up… effectively Amazon from Consumer Discretionary and Facebook/old twiter, Netflix from comms services more like old FANNG… Expanded tech makes up 40% of S&P
But history is repeating. The dramatic losses in debt markets last year, fueled by the most aggressive Federal Reserve policy tightening in a generation, has turned what was once a relatively slow and steady shift away from active bond funds and toward passive products into a stampede.
The gap between passive and active net flows reached a record $1.04 trillion in 2022, almost triple any other year, according to data from EPFR. Passive funds lured $279 billion in new cash, while active funds bled $757 billion.
As of March, assets managed by passive funds surpassed $3 trillion for the first time. They now account for 31% of the fixed-income fund universe, the data show, up from just 13% a decade ago.
5. Regional Bank Turmoil Pushing More Lending to Direct Private Lending.
Dealbook ByLauren HirschWhipsaw trading in shares of regional banks this week made it clear the fallout from three federal bank seizures was far from over. Some investors are betting against even seemingly healthy banks like PacWest, and regulators are gearing up to tack on new capital constraints for small and medium-size lenders.
Large banks, though raking in cash, are facing their own constraints, saddled with loans written before interest rates started rising.
That means businesses large and small may soon need to look elsewhere for loans. And a growing cohort of nonbanks, which don’t take deposits — including giant investment firms like Apollo Global Management, Ares Management and Blackstone — are chomping at the bit to step into the vacuum.
For the last decade, these institutions and others like them have aggressively scooped up and extended loans, helping to grow the private credit industry sixfold since 2013, to $850 billion, according to the financial data provider Preqin.
While most of Europe and North America condemns Russia for its war in Ukraine, as far as politics goes, it’s not a universal stance…
Statista’s Anna Fleck reports that new analysis by the Economist Intelligence Unit has found that Russia’s support base is slowly growing in some parts of the world.
Where 29 countries used to lean towards Russia in 2022, that number has now risen to 35.
Conversely, while the number of countries either West-leaning or actively condemning Russia is still by far the bigger group, its figures have dropped from 131 to 122.
The EIU says this fall is partly driven by the shift of a number of emerging economies into a more neutral position.
The map above uses EIU data to show different countries’ stances on Russia ranging from condemnation to support, as of March 2023.
While Africa shows a patchwork quilt of positionings, the EIU reports that a number of its countries have moved towards the Russian side in the past year.Where South Africa and Uganda were politically neutral on the topic in 2022, they are now listed as Russia-leaning. Meanwhile, where Burkina Faso and Mali were Russia-leaning before, they are now outright supportive of Russia. In Latin America, Bolivia was highlighted as a notable country for its position shift, having also moved from neutral to pro-Russia by 2023.
At the same time, the number of neutral countries has risen from 32 to 35. One country to buck the trend is Bangladesh, which has moved the opposite direction, shifting from being neutral to West-leaning between 2022 and 2023.
Ryan Holiday-It’s very easy to get comfortable. To build up your life exactly how you want it to be. Minimize inconveniences and hand off the stuff you don’t like to do. To find what you enjoy, where you enjoy it, and never leave.
A velvet rut is what it’s called. It’s nice, but the comfort tricks you into thinking that you’re not stuck.
The Stoics knew that this was a kind of death. That as soon as we stop growing, we start dying. Or at least, we become more vulnerable to the swings of Fate and Fortune. Seneca talked over and over again about the importance of adversity, of not only embracing the struggle life throws at us but actively seeking out that difficulty, so you can be stronger and better and more prepared. A person who has never been challenged, he said, who always gets their way, is a tragic figure. They have no idea what they are capable of. They are not even close to fulfilling their potential.
So that leaves you with something to think about today: Are you challenging yourself? Do the choices you make push you or do they help you atrophy? Are you in a velvet rut?
Bespoke Investment Group Heading into earnings season, there was a considerable amount of angst on the part of investors regarding the mecacap stocks and how they would react to their earnings reports. Given their outperformance in Q1, the prevailing view was that the bar was too high, leaving the megacaps susceptible to disappointment when they reported. Within the S&P 500, there are seven companies whose weighting exceeds 1.5% in the index, and in the chart below we list the performance of each company’s stock (largest to smallest) on the earnings reaction day of their most recent report. Of the seven companies highlighted, only two (Alphabet and Amazon.com) declined in reaction to their reports. Two stocks (Nvidia and Meta) surged more than 10%, one (Microsoft) rallied more than 7%, and Apple, with its weighting of over 7%, managed to rise more than 4.5% following its report last week. There’s still a ton of reports left to get through before earnings season winds down, but on a market cap basis, we’re past the peak, and based on the reactions of the largest companies in the market, it’s been a much better earnings season than most investors expected.
Foods will only act upon one’s brain if they in some way chemically resemble an actual neurotransmitter within the brain or affect brain health.
Food has both negative and positive effects; it all depends upon which food you consume, how much you consume, and for how long.
If you wish to alter your current brain function or slow your brain’s aging, you likely need to consume different foods.
Almost everything you choose to consume will directly or indirectly affect your brain. The contents of one’s diet will only act upon one’s brain if in some way they chemically resemble an actual neurotransmitter within the brain or if they are able to interact with an essential biochemical process in the brain that influences the production, release, or inactivation of a neurotransmitter, or the general health of the neuron itself.
Food should be viewed in the same way that we view drugs; they interact with many brain processes and alter how we think and feel. Your brain cannot tell the difference between a food (which is a chemical we consume for its nutritional value) and a drug (which is a chemical we consume for its potential positive benefits on our health).
Obviously, some things we consume affect us more than others. For the purposes of this article, I’m going to define food as anything we take into our bodies, whether it’s nutritious or not; this includes spices, plants, animal parts, drugs of any kind, coffee, tea, nicotine, and chocolate. In order to better understand how food affects the brain it will be helpful to divide them into three categories.
First, those foods we consume in high doses with acute dosing: for example, coffee, sugar, heroin, alcohol, nicotine, marijuana, some spices, and a few psychoactive plants and mushrooms. Their effects are almost immediate and depend upon how much reaches the brain.
In this class, the most important consideration is to get enough of the chemical from within the food to its site of action in our brain to actually produce some kind of effect that we can notice and associate with consuming that particular food. Most of the time, this simply does not happen.
For example, consider nutmeg, it contains two chemicals that our bodies convert into the popular street drug called ecstasy. Yet if we consumed the entire canister of the spice, our guts will notice (with terrible diarrhea) and there is a good chance that we will hallucinate for about 48 hours. According to my students, the experience is quite unpleasant.
Secondly are those foods that affect our brain slowly over a period of a few days to weeks. This is usually called “precursor-loading” and would include many different amino acids (tryptophan and lysine are good examples); carbohydrates that have a high glycemic index such as potatoes, bagels, and rice; fava beans; some minerals (iron and magnesium in particular); lecithin-containing products such as donuts, eggs, and cakes; chocolate; and the water-soluble vitamins. Their purpose is to bias the function of a specific transmitter system; usually to enhance its function in the brain.
For example, scientists once thought that drinking a glass of warm milk before bed or eating a large meal of protein made us drowsy because of tryptophan loading. The current evidence does not support this, but the claim makes my major point: We must get enough of any particular nutrient/chemical to the right place and at the right dose in our brain in order for us to notice any effects. (Unfortunately, in this case, tryptophan has difficulty getting into our brains.)
So, what’s the scientific evidence for considering the cognitive effects of these foods? Mostly, it’s related to what happens when we do not get enough of them.
For example, studies have shown that consuming too little tryptophan makes us depressed and angry and has been blamed for multiple wars and acts of cannibalism. Too little sugar or water-soluble vitamins (the Bs and C) will induce changes in brain function that we will notice after a few days of deprivation. Many authors jump to the conclusion that giving high doses of such nutrients will rapidly improve our mood or thinking: sadly, this is rarely the case. Ordinarily, the foods in this category require more time to affect our brains than those foods in the first category.
The third category includes the slow-acting, lifetime dosing nutrients that have been popular topics in the press recently. This category includes anti-oxidant-rich foods such as colorful fruit and vegetables, fish and olive oils; fruit juices, anti-inflammatory plants and drugs such as aspirin, some steroids, cinnamon, and some other spices; nicotine, caffeine, and chocolate; the fat-soluble vitamins; nuts; legumes; and beer and red wine.
People who eat these foods do not report acute changes in their thoughts or moods (depending upon how much they consume!) but certainly benefit from consuming them regularly over their life span. In general, the benefit comes from the fact that all of these foods provide our brains with some form of protection against the deadliest thing we expose ourselves to every day—oxygen.
Because we consume food, we must consume oxygen. Because we consume oxygen, we age. Thus, people who live the longest tend to eat food rich in antioxidants or simply eat a lot less food. Recent studies suggest that nicotine and caffeine prevent the toxic actions of oxygen in our brains, which is why I’ve included them here.
You can see that depending upon how you frame the question about foods and the brain, you get a different list of foods and a different reason for consuming them. If you wish to alter your current brain function or slow your brain’s aging, you likely need to consume different foods.
But in truth, no one ever considers these distinctions when eating—we just eat what tastes good. Sadly, our brains powerfully reward us when we eat sugar, fat, and salt; thus we have obesity and an oncoming epidemic of obesity-related illnesses. Consequently, like drugs, food has both negative and positive effects and it all depends upon which food you consume, how much you consume, and for how long.
1. Alot of Articles Floating Around About What S&P Does Post Rate Hike Cycle….Wide Range of Outcomes
Liz Ann Sonders Focusing only on the average would suggest a pattern of weakness leading into the final hike, some strength in the immediate aftermath of the final hike, and then a significant sell-off out to about 100 trading days following the final hike. But, take a look at the same average in the second chart below with the full range of outcomes based on the 14 cycles since the S&P 500’s inception in 1928. Obviously, there has been a wide range of outcomes—generally in the range of +30% to -30% over the span of the subsequent year.
The accompanying table below details each cycle, with the date of the final hike, along with S&P 500 performance at the six-month and one-year points. Pattern? Not so much. This highlights that there are always myriad influences on market behavior—not just monetary policy. But it also reinforces one of my favorite admonitions: “Analysis of an average can lead to average analysis.” While penning this commentary, I saw several headlines that flashed something along the lines of “typically, the final rate hike has been a positive for stocks”… there is no “typical” when it comes to this analysis
7. Israeli startup funding hits lowest mark in five years…-70%
Two reports conducted by the Start-Up Nation Policy Institute, and by IVC Data and Insights with LeumiTech show worrying trends for Israel’s tech sector. Only $1.7 billion were invested during the first quarter of 2023 in Israeli tech companies compared to $6.7 billion in the first quarter of 2022
Artificial intelligence is as revolutionary as mobile phones and the Internet.By Bill Gates
In my lifetime, I’ve seen two demonstrations of technology that struck me as revolutionary.
The first time was in 1980, when I was introduced to a graphical user interface—the forerunner of every modern operating system, including Windows. I sat with the person who had shown me the demo, a brilliant programmer named Charles Simonyi, and we immediately started brainstorming about all the things we could do with such a user-friendly approach to computing. Charles eventually joined Microsoft, Windows became the backbone of Microsoft, and the thinking we did after that demo helped set the company’s agenda for the next 15 years.
The second big surprise came just last year. I’d been meeting with the team from OpenAI since 2016 and was impressed by their steady progress. In mid-2022, I was so excited about their work that I gave them a challenge: train an artificial intelligence to pass an Advanced Placement biology exam. Make it capable of answering questions that it hasn’t been specifically trained for. (I picked AP Bio because the test is more than a simple regurgitation of scientific facts—it asks you to think critically about biology.) If you can do that, I said, then you’ll have made a true breakthrough.
I thought the challenge would keep them busy for two or three years. They finished it in just a few months.In September, when I met with them again, I watched in awe as they asked GPT, their AI model, 60 multiple-choice questions from the AP Bio exam—and it got 59 of them right. Then it wrote outstanding answers to six open-ended questions from the exam. We had an outside expert score the test, and GPT got a 5—the highest possible score, and the equivalent to getting an A or A+ in a college-level biology course.
Once it had aced the test, we asked it a non-scientific question: “What do you say to a father with a sick child?” It wrote a thoughtful answer that was probably better than most of us in the room would have given. The whole experience was stunning. I knew I had just seen the most important advance in technology since the graphical user interface. This inspired me to think about all the things that AI can achieve in the next five to 10 years.
The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone. It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.
Philanthropy is my full-time job these days, and I’ve been thinking a lot about how—in addition to helping people be more productive—AI can reduce some of the world’s worst inequities. Globally, the worst inequity is in health: 5 million children under the age of 5 die every year. That’s down from 10 million two decades ago, but it’s still a shockingly high number. Nearly all of these children were born in poor countries and die of preventable causes like diarrhea or malaria. It’s hard to imagine a better use of AIs than saving the lives of children.
I’ve been thinking a lot about how AI can reduce some of the world’s worst inequities. In the United States, the best opportunity for reducing inequity is to improve education, particularly making sure that students succeed at math. The evidence shows that having basic math skills sets students up for success, no matter what career they choose. But achievement in math is going down across the country, especially for Black, Latino, and low-income students. AI can help turn that trend around.
Climate change is another issue where I’m convinced AI can make the world more equitable. The injustice of climate change is that the people who are suffering the most—the world’s poorest—are also the ones who did the least to contribute to the problem. I’m still thinking and learning about how AI can help, but later in this post I’ll suggest a few areas with a lot of potential.
In short, I’m excited about the impact that AI will have on issues that the Gates Foundation works on, and the foundation will have much more to say about AI in the coming months. The world needs to make sure that everyone—and not just people who are well-off—benefits from artificial intelligence. Governments and philanthropy will need to play a major role in ensuring that it reduces inequity and doesn’t contribute to it. This is the priority for my own work related to AI.
Any new technology that’s so disruptive is bound to make people uneasy, and that’s certainly true with artificial intelligence. I understand why—it raises hard questions about the workforce, the legal system, privacy, bias, and more. AIs also make factual mistakes and experience hallucinations. Before I suggest some ways to mitigate the risks, I’ll define what I mean by AI, and I’ll go into more detail about some of the ways in which it will help empower people at work, save lives, and improve education.
Defining artificial intelligence Technically, the term artificial intelligence refers to a model created to solve a specific problem or provide a particular service. What is powering things like ChatGPT is artificial intelligence. It is learning how to do chat better but can’t learn other tasks. By contrast, the term artificial general intelligence refers to software that’s capable of learning any task or subject. AGI doesn’t exist yet—there is a robust debate going on in the computing industry about how to create it, and whether it can even be created at all.
Developing AI and AGI has been the great dream of the computing industry. For decades, the question was when computers would be better than humans at something other than making calculations. Now, with the arrival of machine learning and large amounts of computing power, sophisticated AIs are a reality and they will get better very fast.
I think back to the early days of the personal computing revolution, when the software industry was so small that most of us could fit onstage at a conference. Today it is a global industry. Since a huge portion of it is now turning its attention to AI, the innovations are going to come much faster than what we experienced after the microprocessor breakthrough. Soon the pre-AI period will seem as distant as the days when using a computer meant typing at a C:> prompt rather than tapping on a screen
Emotional Regulation: When feelings overwhelm you, you can’t make good decisions. You’re an emotional crash test dummy. Slow down and get some distance. Notice and name your emotions. Then reappraise. Is this really that bad? Are these thoughts useful?
Optimism: When we can’t see a potential positive outcome, it’s rational to give up. Consider your Best Possible Self. See difficulty as transient, local, and controllable so you stop feeling like a pigeon in life’s shooting gallery.
Cognitive Agility: When you immediately jump to the worst-case scenario, you’re going to want to quit. Take the time to consider more possibilities. And then ask yourself which one you’d bet the mortgage on being most likely. Otherwise, you’ll feel like a shut-in in a house of horrors.
Self-Compassion: You’re letting someone walk all over you. But the person doing the walking is also you. Take that compassion you usually extend to others and offer some of it to yourself.
Self-Efficacy: You build confidence and agency by accomplishing things often enough that it changes how you see yourself. Start small and achieve goals until you start to see yourself as “the kind of person who achieves their goals.”
Everyone struggles. Everyone. Life is about how we see those challenges and how we respond to them.
The most important thing is to practice the above techniques. Do not let this post be another thing that just gets tossed into the attic of the world wide web. Until Silicon Valley invents a way for me to grab you by the lapels over the internet, you need to practice the above yourself. I’m just an NPC in the game of your life offering you a new quest.
Do not forget all the times that felt so horrible but you made it through. This is one of the critical lessons of life. All the times of shrieking madness that became little more than funny stories. “This too shall pass” isn’t enough…
1. KRE Regional Bank ETF Breaks to New Lows…50% of Positions in ETF are Shorts.
Dave Lutz at Jones Short interest as a percentage of shares outstanding in the SPDR S&P Regional Banking ETF (ticker KRE) rose to 96% from 74% a week ago, according to data compiled by S3 Partners. When accounting for the synthetic long bets created in each short sale, means almost 50% of positions in the ETF are wagering on a decline. That number climbed from 42% last Tuesday.
2.7% year-over-year revenue growth, a 24% decline in net income, and operating margins moving down to 25% from 31% a year earlier. Hardly anything to get excited about, but all above the low expectations heading into the report.
5. UBER Chart
UBER holds 200day now making run at 2023 previous highs
Artwork: Xavier Veilhan, The Big Mobile, 2004, metallic structure, 25 spheres in PVC with diameters from 29.5″ to 137.8″, Exhibition View, 3rd Biennial of Contemporary Art of Valencia
What is the best way to drive innovative work inside organizations? Important clues hide in the stories of world-renowned creators. It turns out that ordinary scientists, marketers, programmers, and other unsung knowledge workers, whose jobs require creative productivity every day, have more in common with famous innovators than most managers realize. The workday events that ignite their emotions, fuel their motivation, and trigger their perceptions are fundamentally the same.
The Double Helix, James Watson’s 1968 memoir about discovering the structure of DNA, describes the roller coaster of emotions he and Francis Crick experienced through the progress and setbacks of the work that eventually earned them the Nobel Prize. After the excitement of their first attempt to build a DNA model, Watson and Crick noticed some serious flaws. According to Watson, “Our first minutes with the models…were not joyous.” Later that evening, “a shape began to emerge which brought back our spirits.” But when they showed their “breakthrough” to colleagues, they found that their model would not work. Dark days of doubt and ebbing motivation followed. When the duo finally had their bona fide breakthrough, and their colleagues found no fault with it, Watson wrote, “My morale skyrocketed, for I suspected that we now had the answer to the riddle.” Watson and Crick were so driven by this success that they practically lived in the lab, trying to complete the work.
Throughout these episodes, Watson and Crick’s progress—or lack thereof—ruled their reactions. In our recent research on creative work inside businesses, we stumbled upon a remarkably similar phenomenon. Through exhaustive analysis of diaries kept by knowledge workers, we discovered the progress principle: Of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work. And the more frequently people experience that sense of progress, the more likely they are to be creatively productive in the long run. Whether they are trying to solve a major scientific mystery or simply produce a high-quality product or service, everyday progress—even a small win—can make all the difference in how they feel and perform.
Of all the things that can boost inner work life, the most important is making progress in meaningful work.
The power of progress is fundamental to human nature, but few managers understand it or know how to leverage progress to boost motivation. In fact, work motivation has been a subject of long-standing debate. In a survey asking about the keys to motivating workers, we found that some managers ranked recognition for good work as most important, while others put more stock in tangible incentives. Some focused on the value of interpersonal support, while still others thought clear goals were the answer. Interestingly, very few of our surveyed managers ranked progress first. (See the sidebar “A Surprise for Managers.”)
A Surprise for Managers
In a 1968 issue of HBR, Frederick Herzberg published a now-classic article titled “One More Time: How Do You …
If you are a manager, the progress principle holds clear implications for where to focus your efforts. It suggests that you have more influence than you may realize over employees’ well-being, motivation, and creative output. Knowing what serves to catalyze and nourish progress—and what does the opposite—turns out to be the key to effectively managing people and their work.
In this article, we share what we have learned about the power of progress and how managers can leverage it. We spell out how a focus on progress translates into concrete managerial actions and provide a checklist to help make such behaviors habitual. But to clarify why those actions are so potent, we first describe our research and what the knowledge workers’ diaries revealed about their inner work lives.
Inner Work Life and Performance
For nearly 15 years, we have been studying the psychological experiences and the performance of people doing complex work inside organizations. Early on, we realized that a central driver of creative, productive performance was the quality of a person’s inner work life—the mix of emotions, motivations, and perceptions over the course of a workday. How happy workers feel; how motivated they are by an intrinsic interest in the work; how positively they view their organization, their management, their team, their work, and themselves—all these combine either to push them to higher levels of achievement or to drag them down.
To understand such interior dynamics better, we asked members of project teams to respond individually to an end-of-day e-mail survey during the course of the project—just over four months, on average. (For more on this research, see our article “Inner Work Life: Understanding the Subtext of Business Performance,” HBR May 2007.) The projects—inventing kitchen gadgets, managing product lines of cleaning tools, and solving complex IT problems for a hotel empire, for example—all involved creativity. The daily survey inquired about participants’ emotions and moods, motivation levels, and perceptions of the work environment that day, as well as what work they did and what events stood out in their minds.
Twenty-six project teams from seven companies participated, comprising 238 individuals. This yielded nearly 12,000 diary entries. Naturally, every individual in our population experienced ups and downs. Our goal was to discover the states of inner work life and the workday events that correlated with the highest levels of creative output.
In a dramatic rebuttal to the commonplace claim that high pressure and fear spur achievement, we found that, at least in the realm of knowledge work, people are more creative and productive when their inner work lives are positive—when they feel happy, are intrinsically motivated by the work itself, and have positive perceptions of their colleagues and the organization. Moreover, in those positive states, people are more committed to the work and more collegial toward those around them. Inner work life, we saw, can fluctuate from one day to the next—sometimes wildly—and performance along with it. A person’s inner work life on a given day fuels his or her performance for the day and can even affect performance the next day.
Once this inner work life effect became clear, our inquiry turned to whether and how managerial action could set it in motion. What events could evoke positive or negative emotions, motivations, and perceptions? The answers were tucked within our research participants’ diary entries. There are predictable triggers that inflate or deflate inner work life, and, even accounting for variation among individuals, they are pretty much the same for everyone.
The Power of Progress
Our hunt for inner work life triggers led us to the progress principle. When we compared our research participants’ best and worst days (based on their overall mood, specific emotions, and motivation levels), we found that the most common event triggering a “best day” was any progress in the work by the individual or the team. The most common event triggering a “worst day” was a setback.
Consider, for example, how progress relates to one component of inner work life: overall mood ratings. Steps forward occurred on 76% of people’s best-mood days. By contrast, setbacks occurred on only 13% of those days. (See the exhibit “What Happens on a Good Day?”)
What Happens on a Good Day?
Progress—even a small step forward—occurs on many of the days people report being in a good mood. …
Two other types of inner work life triggers also occur frequently on best days: Catalysts, actions that directly support work, including help from a person or group, and nourishers, events such as shows of respect and words of encouragement. Each has an opposite: Inhibitors, actions that fail to support or actively hinder work, and toxins, discouraging or undermining events. Whereas catalysts and inhibitors are directed at the project, nourishers and toxins are directed at the person. Like setbacks, inhibitors and toxins are rare on days of great inner work life.
Events on worst-mood days are nearly the mirror image of those on best-mood days (see the exhibit “What Happens on a Bad Day?”). Here, setbacks predominated, occurring on 67% of those days; progress occurred on only 25% of them. Inhibitors and toxins also marked many worst-mood days, and catalysts and nourishers were rare.
What Happens on a Bad Day?
Events on bad days—setbacks and other hindrances—are nearly the mirror image of those on good days. …
This is the progress principle made visible: If a person is motivated and happy at the end of the workday, it’s a good bet that he or she made some progress. If the person drags out of the office disengaged and joyless, a setback is most likely to blame.
When we analyzed all 12,000 daily surveys filled out by our participants, we discovered that progress and setbacks influence all three aspects of inner work life. On days when they made progress, our participants reported more positive emotions. They not only were in a more upbeat mood in general but also expressed more joy, warmth, and pride. When they suffered setbacks, they experienced more frustration, fear, and sadness.
Motivations were also affected: On progress days, people were more intrinsically motivated—by interest in and enjoyment of the work itself. On setback days, they were not only less intrinsically motivated but also less extrinsically motivated by recognition. Apparently, setbacks can lead a person to feel generally apathetic and disinclined to do the work at all.
Perceptions differed in many ways, too. On progress days, people perceived significantly more positive challenge in their work. They saw their teams as more mutually supportive and reported more positive interactions between the teams and their supervisors. On a number of dimensions, perceptions suffered when people encountered setbacks. They found less positive challenge in the work, felt that they had less freedom in carrying it out, and reported that they had insufficient resources. On setback days, participants perceived both their teams and their supervisors as less supportive.
To be sure, our analyses establish correlations but do not prove causality. Were these changes in inner work life the result of progress and setbacks, or was the effect the other way around? The numbers alone cannot answer that. However, we do know, from reading thousands of diary entries, that more-positive perceptions, a sense of accomplishment, satisfaction, happiness, and even elation often followed progress. Here’s a typical post-progress entry, from a programmer: “I smashed that bug that’s been frustrating me for almost a calendar week. That may not be an event to you, but I live a very drab life, so I’m all hyped.”
Likewise, we saw that deteriorating perceptions, frustration, sadness, and even disgust often followed setbacks. As another participant, a product marketer, wrote, “We spent a lot of time updating the Cost Reduction project list, and after tallying all the numbers, we are still coming up short of our goal. It is discouraging to not be able to hit it after all the time spent and hard work.”
Almost certainly, the causality goes both ways, and managers can use this feedback loop between progress and inner work life to support both.
Teresa M. Amabile is a Baker Foundation Professor at Harvard Business School and a coauthor of The Progress Principle. Her current research investigates how life inside organizations can influence people and their performance, as well as how people approach and experience the transition to retirement.
