Is it better to be motivated by money or ego?

By Francisco Dao , written on October 29, 2013

From The News Desk

Over dinner last week, my friend Micah explained there are essentially two types of bloggers, those motivated by money and those motivated by ego. As he made his argument about the different incentives and behaviors of each group, I started thinking about how entrepreneurs also fit into these same motivational categories.

Money or ego? Which one was the more effective driver? Which one produced better results? Obviously the two are not mutually exclusive, we all need money and we all have egos, but most people are generally inclined toward one direction or the other. Which way do you lean?

Which is more likely to build a successful business?

In terms of building a sustainable, profit generating enterprise, I think it’s obvious the money driven entrepreneur is more likely to be successful. All businesses ultimately boil down to math and those who are profit motivated typically have far more respect for the bottom line than those who are propelled by other reasons.

Which is more likely to build a better product?

The standard argument of economic incentive suggests that the money-driven entrepreneur would build a better product in order to sell more units and maximize profit. But I believe the purely financial incentive model is incomplete and overly focused on short term returns. Since money is less important to him, an ego driven entrepreneur is more likely to take personal pride in his product and view it as a direct reflection on himself. Therefore, he would be less inclined to cut corners in order to squeeze out a few extra dollars of margin. Finally, where a money driven entrepreneur is prone to harvesting profits, an entrepreneur motivated by his ego is more likely to accept losses if it means producing a better product. Advantage goes to those driven by ego.

Which is more tenacious?

Most people would point to ego driven entrepreneurs such as Steve Jobs and Elon Musk as proof that they are more tenacious than those motivated by money, but I believe people like Jobs and Musk are the exception and not the rule. Generally speaking, profit propelled entrepreneurs are more focused on success than those fueled by ego who tend to have more fallback options. I believe the edge belongs to the money motivated.

Which should you invest in?

This depends on who you are. If you’re a bank and your profits are based on steady interest payments from borrowers unlikely to default, then a profit driven entrepreneur is clearly the better bet. If you’re a VC and you’re looking for someone to hit one out of the ballpark and give you a 10x return, then an ego driven entrepreneur is the one you want. Without in-depth analysis of returns on business loans versus venture capital, it’s difficult to say which one is the better overall bet. Let’s call it a draw based on the investor’s tolerance for risk.

Which is more likely to motivate one to leave a mark on the world?

You might be familiar with the George Bernard Shaw quote, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

For an entrepreneur, focusing on profit is the reasonable thing to do. Without it, he probably wouldn’t last very long. By extension, an entrepreneur motivated by ego first is therefore less than reasonable and quite often has unreasonable priorities. Extrapolating from Shaw’s maxim, an unreasonable ego driven entrepreneur is far more likely to leave his mark on the world than a reasonable one motivated by money.

Which rules Silicon Valley?

When I started this post, I figured the majority of tech entrepreneurs were ego driven based on their typically unprofitable business models. But as I thought about why most people start companies and why so few ever do anything that leaves a lasting mark, I realized I was looking at it the wrong way. In order to understand Silicon Valley, we need to understand that the companies themselves are the primary product for sale and most entrepreneurs these days are trying to sell out as fast as possible. Silicon Valley is in fact money motivated.

I don’t know if we’ve settled the question of which type of entrepreneur is better. I suppose it depends on what you value and what your definition of “better” is. Both motivations have their advantages and disadvantages. Do you know which one motivates you?

[Illustration by Hallie Bateman for Pandodaily]