Reward & Punishment Superresponse Tendency Bias
Number 1 Of The 25 Cognitive Biases…
Under-recognition of the power of what psychologists call ‘reinforcement’ and economists call ‘incentives.’
Examples Of The Reward & Punishment Superresponse Tendency Bias
This is the #1 reason why typically all sales job are commission based – there’s literally no motivation for the salesmen to put in the hard yards to acquire clients and make sales unless they’re getting something extra out of it too – cold hard cash in the form of commission.
Charlie Munger explains that the Federal Express shifted from an hourly rate to a shift based rate as their job was time sensitive.
Needless to say, the quicker they could get the shift done the quicker they could go home and the more money they’d make in a shorter amount of time (provided they worked harder).
How To Avoid Falling Victim To The Reward & Punishment Superresponse Tendency Bias
Understand that if you’re asking or hiring someone to perform a task for you you’re going to likely get a quicker turn-around time and better work if you’re paying a commission or bonus based upon the speed or quality of the work.
At the same time the reward bias can be used on us (or we can strategically use it on ourselves) when it comes to getting things done and reaching goals.
For example, when my business hits X milestone I’m going on a 2 week vacation, or if I stick to my diet for the next 6 days on the 7th day I’m going to treat myself to X meal.
Want To Know More About Charlie Munger’s Cognitive Biases & How To Dominate Life?
I recently purchased Charlie Munger’s flagship book, Poor Charlie’s Almanack – a book filled with hundreds of pages of wisdom from a billionaire and master of mindset and mental frameworks to improve your life..
This book cost me $65 USD. To most this will seem absurd…
“$65 for a book?! What a waste of money”
…these are the same people that spend hundreds of dollars on junk food and alcoholic beverages on Friday and Saturday night.
Delay The Instant Gratification
Don’t adopt the epicurean mentality of “eat, drink and be merry for tomorrow we die.”
You must think long term, you must delay the instant gratification we’re so used to experiencing in this life and invest for tomorrow (stoicism).
“Don’t invest in things that’ll rust, rot or depreciate, invest in things that’ll be worth more later or make you be worth more later”.
The information in this book is worth well over $65 if read and implemented, the information on investing and cognitive biases is worth its weight in gold.
But remember, It’s the application of knowledge that counts, not just the acquisition (read it and take action!)