Excellent blog post by Morgan Housel on incentives, markets, and addictive behavior.
- Three types of incentives:
- Variable interval
Variable interval rewards flood your brain with dopamine because that high is evolutionarily necessary to survive the hellish world of hunting and famine.
So, we have a pretty good idea that stocks will reward us over time. But we have no idea when, or how, or what it will make us endure in the meantime.
It is a variable interval reward. Which is a hell of a drug.
Read the full blog post: Morgan Housel: The Thrill of Uncertainty