Money and behaviour

We know that money influences our behaviour, because we buy most things on special, drive to places that accept our loyalty cards, put up with lousy but well paid jobs, and dress up nicely for expensive restaurants.

A vast amount of scientific research demonstrates that money is effective in motivating behaviour change.




Combining loss aversion and the influence of money would be a powerful behavioural tactic, i.e. promise an action then risk losing money if we fail to keep our word.


We’re risk averse

Potential losses are more effective at getting us into action than potential gains. Said another way, once we have something, we value it more highly. And we’ll do just about anything not to lose money. This was proved in experimental psychology by Amos Tversky and Daniel Kahneman – Kahneman won a Nobel Prize for it in 2002. Also cited below, Richard Thaler’s application of loss aversion to consumer choices. Thaler won the Nobel Prize in 2017 for research proving irrational consumer behaviour.


From the early 2000s neuroscientists have been able to observe with fMRI imaging how loss works differently in the brain to gains. They’ve shown that losing money is interpreted by the brain as a kind of pain. It activates the survival circuitry (amygdala, ACC and insula) which has privileged access to the action centres of the brain (dopamine pathways and the basal ganglia).

Present bias

Present Bias is a cognitive bias; an inclination to overvalue the present compared to a future benefit.

Any benefit in the present (lying on the couch) beats a benefit in the future (getting fit through exercise). And you’re only ever in the now.


[When we are staking, we’re introducing a financial penalty for not doing our exercise; a cost in the here and now. That impacts our behaviour.]


People who stake with meaningful financial disincentives do what they promise 96% of the time. [Small sample size, but we will update as numbers grow.]


Since the 1990s scientists have known that the brain alters itself. The causes of this rewiring are known.

  1. Biological factors (like ageing or pregnancy)
  2. Environmental factors (like exercise)
  3. Knowledge (mostly impacts the prefrontal cortex; not a strong effect)
  4. Experience (causes broader structural rewiring)

Essentially, taking regular action is the easiest way to rewire your brain and adopt new habits. How do you do that? With extrinsic motivation, like staking. Once you’ve taken an action enough times, your brain shifts that action from the consciously initiated to the sensorimotor pathway, and it becomes habitual – less cognitively taxing*. At that point it’s becoming intrinsically motivating, and you’ll no longer need an extrinsic method like staking.

*Wood, Wendy. Good Habits, Bad Habits (p. 59). Farrar, Straus and Giroux. Kindle Edition.