Don’t ask a barber if you need a haircut. – Charlie Munger

The premise behind the model is that the behavior of humans (and indeed, many animals) can be shaped by rewards (positive reinforcement) and punishments (negative reinforcement).

Actions that are rewarded are likely to be repeated, and actions that are punished or lead to undesirable outcomes are likely to be avoided. This simple model is surprisingly powerful in predicting human behavior in a wide range of contexts.

Incentives are anything that motivates or encourages someone to do something. They can be tangible, like money, or intangible, like recognition or prestige. Incentives can be positive (providing a reward for a certain behavior) or negative (removing a negative condition when a certain behavior is performed).

Examples are salary bonuses, fines, likes on Social Media, etc.

The theory is that by manipulating these incentives, you can encourage the behaviors that you want and discourage those you don’t. This is where the concept ties into reinforcement.

Reinforcement, a term widely used in psychology, particularly within Behaviorism and Operant Conditioning, refers to the process of encouraging or establishing a pattern of behavior by presenting a reward or withdrawing a negative stimulus. Positive reinforcement involves adding a rewarding stimulus to increase a behavior, while negative reinforcement involves removing an aversive stimulus to increase a behavior. This concept is closely tied to Feedback Loops.

Examples are Pavlov’s dog and Skinner’s pigeons.


  1. If you’re trying to establish a new habit or achieve a personal goal, create a system of rewards (positive reinforcement) for yourself when you make progress. For instance, if you’re trying to exercise more regularly, you might treat yourself to a new book or a special meal after a certain number of consistent workouts. Similarly, you could set up negative reinforcement by making a deal with a friend to pay them a certain amount if you fail to meet your goals.
  2. In interactions with others, pay attention to what behaviors you’re incentivizing. If you want to encourage open communication, for instance, be sure to respond positively when others share their thoughts and feelings with you. If you react negatively, you’re disincentivizing the behavior you want to see. Consequentially, it also makes sense to practice immediate and honest feedback.
  3. When you’re trying to anticipate or influence other people’s behavior, look at what their incentives are.


  • Be clear about what behavior is being incentivized. The more specific the behavior, the easier it is for the person to understand what is expected and to act accordingly.
  • Reinforcements and incentives should be given as close as possible to the desired behavior. This is because the association between the behavior and the reward is stronger when the reward is immediate. Over time, as the behavior becomes more ingrained, the reward can be delayed slightly.
  • The size of the reward or punishment should be proportional to the behavior. Larger rewards should be reserved for more significant achievements.
  • Different people are motivated by different things. It’s important to know your audience and what they value to provide meaningful incentives.
  • Reinforcers lose their effectiveness over time. If an individual is given too much of a specific reinforcer, they can become satiated or full of it. Similarly, if the individual has been deprived of a certain reinforcer, it may increase the effectiveness of that reinforcer.


  • Be mindful of the risk of over-incentivizing, as it may lead to undesirable behaviors like shortcuts and dishonesty.
  • Be cautious about potential unintended consequences of incentives. If not designed properly, incentives can lead to undesirable behavior. For example, if a company incentivizes its sales team purely based on the number of products sold, it might lead to pushy sales tactics that damage the customer relationship.
  • Extrinsic rewards, if not handled properly, can sometimes undermine intrinsic motivation.