Start thinking about incentives

“Never, ever, think about something else when you should be thinking about the power of incentives.
— Charlie Munger

Everyone knows incentives are important, whether consciously or subconsciously. Companies pay salesmen through a commission structure rather than a base salary because the incentives of the two parties overlap.  The company gets higher sales figures/profits and the salesman brings home more money. Simples.

Like all human behavior, this is the direct result or byproduct of our evolutionary journey as a species. By having the ability to connect an action with an outcome we became conditioned to repeat behavior that works. Back when we roamed the grasslands, figuring out how to sneak up on prey or work in a team was rewarded with an increased food supply and living conditions. In the modern world, this same mechanism is occurring however instead being rewarded with food we get rewarded for arbitrary tasks with money that can be exchanged for food among other things.

The human ability to respond to rewards (and punishments) is normally a great thing. We consistently exercise because we are rewarded with feel-good chemicals, we don’t touch a hot stove because we know it will cause us pain. This bad side however is when we don’t understand what incentives control our current actions. This is difficult as it can sometimes reveal things about ourselves we would rather not admit. However the sooner you realize what incentives are actually responsible for your current position, the sooner you can course correct if you have been mislead.

Not coincidentally, it is the biggest decisions we make which I believe we are most prone to follow the wrong incentives. Where do you live? Why are you working in your current? What are you looking out of your relationships?

It is these decisions which we should really take a couple of years making but normally end up falling into them through coincidences and social pressure. This is because when we are feeling the stress of having to make a big choice, we react by taking the easiest, most available path.

An obvious one is where you decide to live. When you are young this is obviously not in your control but as you get older, the city you choose to live in can be a major factor in how your life turns out. For example, if your into tech, choosing to live in a start up hub can be a make or break factor in your future. Same goes for finance and acting. Outside of careers, you want to live somewhere where you can carry out your hobbies, mingle with plenty of single people or raise a family depending on your situation. These are all valid incentives that can make a difference to your quality of life however most people don’t consider these things when deciding. They end up living somewhere because they got a job, went to university/college or just happened to have grown up there.

The incentive to be be ‘lazy’ (ie. not spend valuable energy thinking up solutions to problems which are not technically broken) overrides the above incentives which leaves you stuck in the wrong location.

Another easy one to understand is your current job. Are you working in a career to currently reach your true desires? They could be building something cool, earning a lot of money,learn a new skill, working with smart people. More likely you are in your current job because of completely different but long term damaging incentives:

  • You want to look consistent with a decision you made when you were 18 of what to study in university.
  • Your friends all started applying for the same grad roles out of university so social proof made you do they same.
  • Your parents always wanted you to be a doctor/engineer/lawyer/whatever.

The point i’m trying to get across is that once you start thinking of the real  incentives that are driving your actions,you will start to see what you really desire and make better decisions with the real incentives in mind. Try it and see how your self awareness changes.

Feel free to drop me a mail or comment your thoughts.

 

This Year

I like having goals for each year. It helps me improve my life. Even if I don’t reach all my goals, I normally get 80% of them and have made considerable progress on the remaining. 

2017 goals, reasoning and outcome’s where:

  • Run a Marathon- to get fit. Under 4 hour time, was easier than imagined.
  • Meditate a minimum of 7  minutes a day- train myself to be more present and increase happiness. Successful, did it before sleeping each evening. Not sure how  much it helped but figure being out of my head for even a bit is beneficial.
  • No masturbating or alcohol in January- see how my energy level changed without these activities. No masturbating was also to increase my incentive of going out and having real experiences. Quite useful, felt more energetic which helped productivity each day. Had strange dreams.
  • Write at least one thing each day to reflect and find feedback loops, IE. A gratitude, a lesson learnt or a reflection on movements towards goals. Was more useful for looking back and seeing how I was feeling and experiencing at different periods.
  • Have sex. Like anal sex (i’m gay). Felt pressured putting this in by a friend. Didn’t (properly) achieve this, but don’t mind as had other experiences and encounters. Don’t mind waiting on this one until i’m with someone i’m comfortable with.
  • Date six people, unless one works out. Dated about 4 but then had a couple of one-off sexual encounters.. so almost there. Added this goal as there isn’t as many gay people in the world(relatively), I feel I need to set goals to meet as many as possible to find the ones that could be suitable friends or boyfriend.
  • Read more primary/source texts. Wanted to get closer to the source of knowledge so it was less filtered. Didn’t achieve as well as I had hoped. Read Ben Franklin, Marcus Aurelius, Seneca. Failed to read Charles Darwin which I was disappointed with.
  • Read more evolutionary psychology and Stoicism.  Evolutionary psych probably most important thing in understanding human behavior. Stoicism to help me better deal with own internal state. Stoicism reads are above. For evolutionary psych, I didn’t do as much as hoped but picked up bits from Influence-R. Cialdini,  Origins Of Virtue- Matt Ridley, Poor Charles Almanack- Charlie Munger. And currently in the middle of a very good book which I think I plan to write a separate post on.
  • Practice self-awareness at all times. Maybe impossible. Included as it is a nice reminder when I look at the goals to be present.
  • Learn at least one programming language. Taught myself some Java but ended up in a job where I develop with a niche database language, so this one worked out quite well.
  • Reduced caffeine intake to once or this per week as a reward to help form a habit. Failed quite miserably on this one, daily caffeine intake stayed fairly consistent all year round (one cup of coffee, 3/4 cups of tea). Leads me nicely to this years goals.

2018

  • Cut out daily caffeine. I think it is better to be in a natural non-caffeinated state as much as possible.  Substituting for decaf tea and coffee working well so far.
  • Write 20 blog posts. I’m including this to keep myself writing and reminding me of these commitments.
  • Read two textbooks  on the software I develop with. This is to try get an edge in the field where I am working with very technical minded  people from mathematics and physics backgrounds. I plan to get my edge through acquiring more language specific knowledge.
  • My big one this year is to set up a business, preferably with a passive income stream. I have wanted to do this for many years, but seem to be always putting it off. My crappy excuses so far include acquiring more skills to set my self up for success  and waiting for the right opportunity to come. But now the time has come to get to work.