There’s a Charlie Munger quote that goes “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. Never a year passes that I don’t get some surprise that pushes my limit a little farther.”
But what does that mean? How does it show up? What are some of the concept instantiations that might colour in this experience?
The Incentive Series is a deep dive into what that might look like — through the lens of one particular industry.
- Lousy Incentives in the Restaurant Business (members only) — How the business model of the restaurant business explains a huge number of behaviours we may observe about F&B businesses in general.
- Pay Attention to Deviations From Mainstream Incentives — Now that we have some understanding of the incentives in an F&B business, we take a look at a handful of instances where deviations from mainstream incentive-driven behaviours tell us something interesting about the business. This turns out to be a generalisable idea: whenever you understand the incentive structure for an industry, it’s usually a good idea to pay special attention to businesses and organisations that flaunt those incentive structures. And for good reason — there's usually something interesting going on.
- The Best Incentives Are Hard To Copy (members only) — If differentiated incentive structures are so beneficial to the organisations that run them, why are they so hard to copy? There are two reasons why.