“Well I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes getting some surprise that pushes my limit a little farther.”
Charlie Munger

It’s strange how just by reading the news everyday we can become cynical.  How so much injustice can be done, how so much greed can run amok, and how so much nothing is being done, is kind of a mystery.  However, one thing that seems to elude most policy makers is the power of incentives to drive people’s decisions (especially policy makers decisions).  Regardless of whatever ideologies they spew, it still all comes down to incentives.

“Oh big oil, you want to give me hundreds of thousands of dollars?  Of course you know that I’m still going to vote according to my values.”  A question: how many thousands of dollars does it take to change someone’s values?  Probably a lot less than a hundred thousand.

A similar occurrence happens in school.  “Oh, we just have a big exam at the end of the course?  Well then what’s the point of actually trying to learn the material?  I just need to figure out how to do well on the exam.”  And that’s exactly what happens if you’ve ever taken one of these types of courses.

A million other examples are easy to come by in every nook and cranny of our society.  So it’s almost surprising that we often forget about this important concept.  I know I did and I probably would’ve forgot it for a lot longer if I had not happened to come across it recently while I was reading The Big Short.  Charlie may be old but he still hasn’t steered me wrong yet.  Maybe someday I’ll learn to not forget what he says… I just have to figure out the right incentives first.