How can you give yourself a few incentives ?

 "Show me the incentive and I’ll show you the outcome."

—Charlie Munger

An incentive is a mechanism that relates a reward or punishment to a certain performance or behavior.

The objective of establishing an incentive is to induce a certain behavior. It is assumed that the subject to which it is applied will act as a rational agent evaluating costs and benefits (homo economicus).

Therefore, the objective subject will consider optimal to develop the behavior that the designer of the incentive seeks, provided that said stimulus is well designed.

Thus, for example, if you want to motivate a worker to try harder, you can design an incentive that rewards their best effort. If it is a salesperson, a common incentive is to share in the highest sales through commissions.

TYPES OF INCENTIVES

There are at least four types of incentives:

• Monetary or financial incentives: They are the most widely used and surely one of the most effective. They can include a higher salary, payment of sales commissions, prices in money or stocks, etc.
• Moral incentives: They try to push people to do what is supposed to be right or good in a given society. Moral incentives are more complex to apply than monetary ones as values vary between different cultures. Furthermore, it is the person who ultimately decides whether or not she agrees with a certain moral convention.
• Natural incentives: They are based on human nature itself. Thus, for example, people in general are naturally curious so they can be motivated to do certain things in order to satisfy these natural needs.
• Coercive incentives: They are based on emphasizing the negative consequences or punishments that will not carry out a certain conduct or behavior. These are incentives that are based on the negative and therefore do not usually motivate subjects internally, and they only act out of fear.

Human action is often governed by incentives, many of which exist at the unconscious level. Every time a person performs a certain activity, they do so for a purpose that, in one way or another, will bring satisfaction. This end is the incentive that mobilizes action.

The incentive can be the stimulation that is given to an individual for her good performance in any field (work, affective, etc.) with the intention of making an effort to maintain it. It is, therefore, a reward.

Our daily life usually presents a few incentives, of different magnitudes, that drive us to keep going. When a child strives to achieve good school performance, not only does she seek her own personal and intellectual development, but she is also likely to crave the reaction of her parents or guardians, the satisfaction and pride in their looks. Just as in operant conditioning, where behaviors are performed in order to either gain reinforcement or avoid punishment, incentive theory states that our actions are directed toward gaining rewards. Money is also an excellent example of an external reward that motivates behavior.