The Mental Model of Incentives

Charlie Munger wrote in Poor Charlie’s Almanack:

“Perhaps the most important rule in management is to get the incentives right.” (see 30+ Charlie Munger Quotes).

Charlie argues that people respond most strongly to what they view as their incentive or disincentive.

In business, there is almost always someone else involved in whatever you are trying to do. Munger recommends that you always reflect on:

“What is someone getting out of this.”

Charlie gives a few business examples of incentive bias (source: Poor Charlie’s Almanack).

FedEx …

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The Top 100 Mental Models Needed To Succeed In Business

I’m fascinated by these models, and their application to business (not just investing) and life, and decided to keep a list of ones I run across (some are related to Munger and others I’ve learned about elsewhere (but believe Munger might appreciate)).

Warren Buffett's Right-Hand Man Charlie Munger

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Are Cubbie Fans The Reason The Cubs Have Sucked For 100+ Years?

The Chicago Cubs have not won a championship since 1908 – that’s the longest drought in North American sports…not just baseball…any major sport.

So, why have the Cubs sucked for so long?

This article is an excerpt from a terrific new book called Scorecasting that dug into a theory of the Cubs Curse.

The theory is that the Cubs don’t have as much incentive to win…and it’s due in large part to their fans. …

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