Google's culture has become slow and risk-averse, not due to a lack of talent, but because its cushy compensation packages discourage top employees from leaving. This fosters an environment where talented individuals are incentivized to take fewer risks, hindering bold innovation, particularly in the fast-moving AI space.

Munger notes that many large law firms compensate senior partners equally, regardless of their individual contributions. This seemingly inefficient structure is a deliberate defense mechanism to prevent the powerful and destructive force of envy from creating disorder and tearing the firm apart.

Focusing on individual performance metrics can be counterproductive. As seen in the "super chicken" experiment, top individual performers often succeed by suppressing others. This lowers team collaboration and harms long-term group output, which can be up to 160% more productive than a group of siloed high-achievers.

Bridgewater's famed "radical transparency" initially failed because it was a top-down mandate for criticism. The key shift was focusing the "arrow of transparency and feedback up rather than down." The system now prioritizes leaders receiving critical feedback, as arrogance at the top is far more destructive than among junior staff.

Gifting non-performance-based shares to all employees doesn't foster an 'owner mindset.' True ownership thinking is better cultivated through incentives tied to specific, controllable outcomes, like targeted cash bonuses. Standard equity compensation often just becomes another part of the salary package, disconnected from individual impact.

To break down silos and encourage a platform mindset, Microsoft CEO Satya Nadella changed performance reviews. Every employee had to document how they contributed to the success of others, directly linking collaboration to their compensation. This made the cultural shift tangible and non-negotiable, moving beyond mere talk.

Bending Spoons uses a radical compensation model: fixed salaries with no bonuses or performance-based incentives. The philosophy is that hiring for high integrity and professional pride fosters better alignment than complex incentive systems, which are costly, create perverse incentives, and hinder collaborative problem-solving.

A company’s true values aren't in its mission statement, but in its operational systems. Good intentions are meaningless without supporting structures. What an organization truly values is revealed by its compensation systems, promotion decisions, and which behaviors are publicly celebrated and honored.

Structuring compensation around a single, firm-wide P&L, rather than individual deal performance, eliminates internal competition. It forces a culture of true collaboration, as everyone's success is tied together. The system is maintained as a meritocracy by removing underperformers from the 'boat.'