Worker’s Compensation

Appears in Munger’s worldly-wisdom lecture as his illustration of incentive-driven system design: he argues that, if he were running civilization, compensation for stress in workers’ comp would be zero — not because work-caused stress isn’t real, but because the net social damage of allowing it to be compensated at all outweighs the harm of leaving a few genuine cases uncompensated. A concrete case of the Let Life Be Hard principle.

Context: Workers’ compensation is a form of insurance that pays wage replacement and medical benefits to employees injured in the course of employment, in exchange for relinquishing the right to sue the employer.

Where this appears

• Charlie Munger — A Lesson on Elementary Worldly Wisdom, Revisited — Munger’s argument that compensating for stress invites cheating and net social damage.