Creating a Coherent Incentive Environment

Written on August 10, 2008. Written by .

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As social animals, we are heavily influenced by the people around us. We each have our own personal value systems, but at the same time, our values are quickly and easily swayed by others. If you want to learn how to surf, but you never seem to have the motivation, your best strategy is to surround yourself with avid surfers. Suddenly surfing will seem more important and you will start to lose interest in your previous activities. This is basically how good schools work; they create an environment in which incentives make you want to learn. It is not about passing or getting grades-these don’t really make you want to learn, they just make you want to succeed whether you learn or not. Rather, it is about the fact that understanding the subject better will make your work in the class more efficient and allow you to help or impress your classmates. Taking classes can build your interest in things that you would not have cared about otherwise.

Our interests are thus a product of our personal tastes and our incentive environment. Our incentive environment is made up of all the incentives that we are exposed to: making money, being admired, experiencing victory, and of course the fear of loss, disapproval, and failure. In almost all cases, these incentives come from other people-you need someone to give you the money, someone to admire you, or someone to be victorious over. You can achieve victory over a personal challenge, but our primitive human psychology devalues such victories. Because of psychological factors, we can nearly say that incentives come entirely from other people.

For most people this isn’t a big problem because if you are “normal” then your interests will be similar to the interests of others and this creates incentives that encourage those interests. But what if your personal interests are not consistent with the incentives that other people establish for you? This can lead to a type of cognitive dissonance in which you spiral through contradictory ways of thinking. This confusion can lead to decision-paralysis and severe inefficiency due to lack of focus.

When I started graduate school, I had my class environment encouraging me to learn more, my friends encouraging me to socialize more, and the city encouraging me to make more money (See Paul Graham’s Cities and Ambition). These incentives were not coherent; they were pulling me in every direction and none were fully aligned with my personal goals. This caused me a lot of mental strife. If you put yourself in an environment that is intrinsically contradictory or contradictory to your personal goals, then you will constantly be spinning in vortices of cyclic psychology.

Of course this is all psychological, which means you probably could train yourself to get over this stuff, but I am guessing it would be pretty hard, probably harder than just setting up an environment that is conducive to accomplishing your goals. I believe the best strategy is to determine the optimal incentive environment that will help you achieve your goals and create that environment for yourself. Think of how powerful this is. Imagine how powerful you would be if you had infinite discipline. That is basically the power you would have in your ideal incentive environment because you would no longer need any discipline to act according to your goals; the incentives will ensure that on their own.

Based on this analysis, I have concluded that one of my top priorities is to work on establishing my own incentive environment. I want to learn more about programming and eventually start a business, hopefully one that utilizes programming. But I also don’t want to just chase money, I want to do what I think is important, whether it is highly profitable or not. So my ideal environment might be a house with around 6 guys who are partitioned into teams that are each trying to start a programming-related business. Perhaps some of them would be working part-time and some of them would be living off their savings. A house like this would promote interesting discussions in which actual ideas would be conveyed, unlike most conversation. This house would be a bootstrapper’s incubator. The residents would have partners to celebrate their victories with them and show interest in what they are doing. It is these crucial elements that enable human greatness.

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