What determines human performance? In general, human performance is an interaction effect of the person and his/her social environment, that is, it is the person’s talent and motivation (practice) combined with favorable/unfavorable social conditions that directly influence performance as well as indirectly by building his/her skill level. The effects of talent and motivation (practice) are embedded and manifested in skill, which then becomes a proximal and immediate determinant of performance. Thus, talent and motivation to practice/train are the direct determinants of skill and indirect determinants of performance via skill possession and skill execution. Tasks and activities differ substantially in required skills, ranging from one extreme of vegetable picking to another extreme of landing fighter jets on aircraft carriers. The former requires very little skill, whereas the latter demands ultimate precision in skill execution. Almost everyone can pick vegetables but only very few can acquire skills to perform the second task.
The two person-related determinants of performance (talent, motivation) determine performance, in that a person must have talent and motivation to achieve a high level of skill on which h/she then performs tasks or activities. But no matter how talented and motivated a person is to practice and train, he/she won’t become a top performer if h/she does not have a supportive social environment, most importantly his/her family. The formula for skill-performance can therefore be expressed as follows:
A x M x O = SKILL -> PERFORMANCE
Where A stands for ability, M for motivation to practice, and O for opportunity provided by social environment. The combined effect of A, M, and O reveals itself directly in observed skilled performance. This combination enables an individual to reach successively higher levels until and unless he/she is weeded out in the process of pursuing greater heights. No one gets to expert levels without ability, even though many psychologists have argued that all one needs is “deliberate practice” for competing and performing successfully at high levels, which of course is nonsense. The argument is born out of political expediency and illusion that we all are equal, and everyone can reach expertise at anything, if only we work hard enough. Moreover, as important and necessary as skill and its three underlying factors are, skill is not the only determinant of performance because such psychological factors as anxiety, fear and confidence play a critical role in an individual growing into an exceptional performer and when performing in specific situations.
The above formula explains why individual differences in performance exist and why equality, including socioeconomic equality, in any area of human performance is a logical fallacy. Individual differences are undeniable because people will always differ in inherited abilities, traits, motivation and interests on the one hand and early social environments on the other. Some parents will always be more educated and financially richer than others because of the differences in A, M, and O, thereby being able to provide better opportunities for their children.
At the heart of individual differences is individual freedom to pursue one’s goals and dreams in free society. If society allows individual freedom, there will be large individual differences in wealth because of differences in person-related (ability and motivation) factors and environmental conditions to pursue goals. Thus, individual differences in performance outcomes are the price of freedom in free society. No social program can ever eliminate these differences. But society can completely suffocate individual differences by stripping off individual freedom and making everyone equal, equally miserable, like seen in Russia, North Korea, Cuba, Iran, and Venezuela. In free society, in contrast, individual freedom means freedom to become highly motivated to achieve or simply remain lazy and thus achieve little. Motivation is a powerful factor of performance, but it must be allowed to flourish to be so. It is an inherent and fundamental characteristic of humans to try to become better at anything they choose to do, but only if they are allowed and encouraged to explore, create, and construct better conditions for themselves and their families.
China is an interesting case because of its claim of being a communist country and therefore supposedly not allowing individual freedom, but instead “warmth of collectivism”. Yet, it allows individual freedom to pursue high performance in most areas such as wealth creation and private ownership on a limited basis. Despite lacking important resources (e.g., oil, natural gas), China has risen in about 25 years to the second most powerful economy in the world, all due to individual freedom to pursue one’s goals, albeit accompanied with high surveillance by the government. China’s regulated individual freedom is a far cry from the basic tenets of communism. In contrast, despite its vast natural resources, Russia remains a poor and undeveloped nation because individuals there have no freedom. Not only can people not pursue their individual goals in the country, but wrong words can make them fall from a balcony.
What does all this mean for meritorious performance and its rewarding? If some individuals are rewarded for factors other than their performance (e.g., sex, race, loyalty), motivation of those not so rewarded is severely undermined, leading to the “why-bother” mentality and acceptance of mediocrity. Because society is a sum of individuals, such unmotivated people’s relatively poor performance will negatively impact an entire nation’s GDP, making everyone worse off. People cannot be rewarded for the same performance less because they are females or black, for example, nor can they be given more because of these characteristics. A system that functions on this principle is the fairest system of all. It does not discriminate against or for anyone, but rewards people solely based on their performance. Naturally, because people are human, they make intentional or unintentional errors in rewarding performance, but such errors must be called out and corrected.
Rewarding performance solely on its merits eliminates social injustices but cannot throw out socioeconomic inequality. As people are differently endowed with talent and motivation, they will always differ in meritorious performance. To deny meritorious performance is to deny individual freedom to pursue high achievement and better outcomes, and by extension, it is to deny free society. In free society, socioeconomic inequality will never disappear because of individual freedom to create better conditions for oneself and one’s family.
Society can only influence “opportunity” (O in the formula). It cannot do anything about ability or talent, but by providing equal access to opportunities, it encourages motivation to pursue high achievement and creation of better living conditions. The most important thing free society can do is to demand that everyone is given equal access to opportunities to pursue individual dreams and goals. This access is denied if society sets quotas for rewards based on nonperformance factors such as race, sex, ethnicity, geographic location etc. Equal opportunity is logically impossible in free society where ability and motivation are allowed to flourish unimpeded because, importantly, parents differ in education and wealth and thus in being able to provide different opportunities for their children. Individuals ranked lower on the measures of ability and motivation will never be able to have an equal opportunity to compete for resources, but if they still want to try, they ought to have access for attempting to succeed. It is this process of exploring success and failure that critically helps individuals find a match for their talent and motivation in certain activities, tasks and jobs. It is therefore essential that individuals have equal access to opportunities to fail and eventually succeed. In short, there is no such thing as equal opportunity but there is equal access to opportunities. Equal opportunity is one of the greatest myths of our time.
All this supports Warren Buffett’s statement that “the poor are not poor because the rich are rich, and the rich are not undeserving because they have contributed brilliant innovations and managerial expertise to America’s well-being”. He justifiably believes that today’s economy has become highly specialized requiring “specialized talent”, the result of which is that “economic rewards flow to the people with specialized talent and skills”. In this system, individual performance is rewarded proportionately based on accomplishments and merit, nothing else. In the long run, all members of society benefit from the specialized skills of the few. Lest we forget, an average person today lives better than the medieval kings and queens.