That’s a Charlie Munger quote about how incentives drive nearly everything. I have come to accept this philosophy as one of the simplest, strongest heuristics through which to view nearly everything pertaining to human affairs. Nothing I’ve seen in my industry has ever contradicted it.
It’s why capitalism works but has periodic massive failures. It’s why socialism and communism never work, never have worked and never will work. The hedge fund manager Leon Cooperman has used his foundation to send 500 children in the Newark, NJ area to college with full scholarships. He told my partner Barry in a recent interview that he believes in “equality of opportunity, not equality of outcomes.” Lee’s a realist. He understands that leveling the playing field early on will help more than redistribution later, because an economy and a society require the right incentives.
Back in 2016, my friend Patrick O’Shaughnessy wrote about what happens when people in power demand a certain outcome and pay little heed as to how that outcome will be achieved…