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The Power of Incentives: Inside the Hidden Forces That Shape Behavior

https://fs.blog/2017/10/bias-incentives-reinforcement/

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The Power of Incentives: Inside the Hidden Forces That Shape Behavior
Charlie Munger According to Charlie Munger, there are only a few forces more powerful than incentives. In his speech " The Psychology of Human Misjudgment," he reflects on how the power of incentives never disappoints him: 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.

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The Psychology Of Behavior

In trying to change a behavior, reason will take you only so far, incentives must be taken into account as well. 

In psychology, operant conditioning is a type of learning in which the strength of a behavior is modified by its consequences, such as reward or punishment. This is the predominant theory on how humans behave.

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Continuous Versus Intermittent Reinforcement

Studies on reinforcement revealed that the best way for us to learn complex behaviors is via continuous reinforcement, in which the desired behavior is rewarded every time it’s performed. Consistency and timing are the keys.

Nonetheless, some argue that intermittent reinforcement is the most efficient way to maintain an already learnt behavior. It consists of giving reinforcement only some of the times that the desired behavior occurs.

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The Benefits Of Intermittent Reinforcement

  • Rewarding the behavior immediately may take time away from the behavior’s continuation.
  • It’s cheaper not to reward every instance of a desired behavior.
  • By making the rewards unpredictable, you trigger excitement and thus get an increase in response without increasing the amount of reinforcement.
  • Since the person is already adapted to not always being rewarded, they take longer to stopping the behavior when reinforcement is removed.

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Scheduling Reinforcement

Scheduling the rewards on intermittent reinforcement can be used on various schedules, each with its own degree of effectiveness and situations to which it can be appropriately applied. Some of the schedules are:

  • Fixed-ratio: used to reward based on the amount of work done.
  • Variable-ratio: are unpredictable as the amount of work done between rewards varies. This normally produces more work than any other schedule. (Varying the intervals between rewards also makes it unpredictable, but that often makes people feel unappreciated.)
  • Fixed-interval: rewards people for the time spent on a specific task. Response rates on this schedule are low as effort is not rewarded.

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The Flaws Of Punishment As A Motivator

  • It’s behavior suppressing powers usually disappears when the threat of punishment is removed.
  • It often triggers a fight-or-flight response and renders us aggressive if escape is not an option.
  • It inhibits the ability to learn new and better responses, often leading to responses such as escape, aggression, and learned helplessness
  • Punishment also fails to show subjects what they must do and instead focuses on what not to do.
  • It is often applied unequally as we are ruled by bias in our assessment of who deserves to be punished.

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Motivational Alternatives To Punishment

Motivational Alternatives To Punishment
  • Stopping rewards to an undesirable behavior while rewarding desirable behaviors.
  • Positively reinforcing a less preferred activity with a more preferred activities.
  • Giving a prompt, a stimulus that encourages the desired behavior. Then reinforcing any approximation to the target response; that’s called shaping. 

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The first views on motivation

The first views on motivation
  • At first, psychologist William James thought that only the initial act was conscious, thereafter behaviour was a spontaneous cascade of habits. He suggested we struggle with motivation when ...

Mathematics of motivation

When Ivan Pavlov and his dogs led to the discovery of learned behaviour through repeated exposure, and Edward Thorndike discovered the Law of Effect that stated that rewarded behaviours tended to increase, many psychologists were impelled to separate psychology from armchair introspection and formulated their theories as mathematical formulas.


  • The Drive x Habit Theory. Clark Hull's formula was sEr = D x sHr, which states that excitatory tendency (E) is the result of the drive (D) combined with the habit (H). The drive is nonspecific, such as hunger or thirst. The habit, however, depends on the stimulus (s) and response (r). But the theory turned out to be wrong and even opposite in many cases. 
  • Expectation x Value Theory. Drawing on ideas in economics and game theory, Edward Tolman and Kurt Lewis formulated an alternative account by evaluating motivation based on expectations. Tolman expressed the ideas as the mathematical formula: Subjective Expected Utility = Probability1 * Utility1 + P2U2 + P3U3 + … where subjective expected utility of an action equalled the motivation to act. But, if you expect a reward, why act and not simply passively wait for the expected reward? 

Motivation as change

Donald Hebb realised that existing theories were too focused on reacting to the immediate environment. Thoughts, ideas and goals could be just as strong for triggering action as sights and sounds.

Together with John Atkinson, they noted that the study of motivation had undergone a "paradigm shift", where motivation couldn't be seen as how actions get started, but how the organism decides to change its behaviour from one thing to another.

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Learning theories

Learning theories develop hypotheses that describe how learning takes place.

The major theories of learning are the following: 

  • behaviorist theories 
  • co...

Behaviorism theories

The behaviorist perspectives of learning originated in the early 1900s. The main idea of behaviorism is that learning consists of a change in behavior because of obtaining, strengthening and applying associations between input from the world, and observations of the individual.

  • Learning is reinforced by exercise and repetition, followed by a positive reward.
  • Learning takes place when the right parts of more complex behavior are rewarded.

Cognitive psychology

Cognitive psychology started in the late 1950s and contributed to the move away from behaviorism.

  • Instead of viewing people as collections of responses to external stimuli, people are viewed as information processors.
  • Cognitive psychology was influenced by the computer that processes information, that became analogous to the human mind.
  • Cognitive psychology understands learning as absorbing knowledge, acting on it, and storing it in memory.
  • The main teaching methods are lecturing and reading textbooks, where the learner receives knowledge passively.

Smartphones and Messaging

Smartphones and Messaging

Phones became smart more than a decade ago and started doing almost everything.

While the app store has millions of apps to take care of our needs, connecting with other people remains one ...

The Message

The technological tools we use keeps us connected to the people that matter to us, and the text (later rich text message) is one of the oldest ways of communication since portable phones came into existence.

It also has a hidden secret that makes us keep checking it.

The Four-Step Hook

... deployed by the messaging software and many other products is composed of:

  1. Trigger
  2. Action
  3. Variable Reward
  4. Investment

Understanding these four steps makes us see the hidden psychology behind a user's daily tech habits.