To make culture tangible, create memorable rules with "shock value." At A16Z, being late for a meeting with an entrepreneur costs a partner $10 per minute. This financial penalty makes the abstract value of "respecting founders' time" an unforgettable and enforceable daily practice.

Drawing on Charlie Munger's wisdom, investment management problems often stem from misaligned incentives. Instead of trying to change people's actions directly, leaders should redesign the incentive structure. Rational individuals will naturally align their behavior with well-constructed incentives that drive desired client outcomes.

Charlie Munger, who considered himself in the top 5% at understanding incentives, admitted he underestimated their power his entire life. This highlights the pervasive and often hidden influence of reward systems on human behavior, which can override all other considerations.

The fear of loss is stronger than the attraction to gain. This "loss aversion" explains why people hesitate to initiate positive gestures, like smiling at a stranger in an elevator. They are willing to sacrifice an almost certain positive reciprocal outcome (98% chance) to protect against a tiny risk of looking foolish (2% chance).

As Charlie Munger taught, incentive-caused bias is powerful because it causes people to rationalize actions they might otherwise find unethical. When compensation depends on a certain behavior, the human brain twists reality to justify that behavior, as seen in the Wells Fargo fake accounts scandal.

Beyond the desire for success, the intense fear of embarrassment and public failure can be an incredibly potent motivator. For high-profile individuals, the social cost of failure is so high that it creates a forcing function to succeed at all costs.

Maximizing profits in a crisis, such as a hardware store hiking shovel prices during a blizzard, ignores the powerful economic force of fairness. While rational by traditional models, such actions cause public outrage that can inflict far more long-term brand damage than the short-term profits are worth.

While rewards can remind people of expectations, they are poor at building skills. Research shows a strong negative correlation between using external rewards (e.g., money) and developing intrinsic motivation. The more you motivate externally, the more you may weaken internal drive.

Despite emotional rhetoric, human behavior is fundamentally driven by incentives. Even the most ardent socialists will act as capitalists when presented with direct personal gain, revealing that incentive-based economics is a core part of human nature.