It's not "the iron rule", just one of many heuristics of limited applicability. Hurting instead of rewarding is often just as effective. And rewarding can also backfire in the worst way.

Munger's quote seemed to me like a more colorful rendition of "incentives matter," which is an iron rule (as it contrasts with what people often want to be true, which is "intentions matter"). Rewards backfiring is generally mistakenly applied rewards, like sugar on the floor, and punishments seem like they can be considered as anti-rewards; you don't get what you punish (with, again, the note that precision matters).

The Stockholm syndrome isn't only about hurting the hostage. The captor gains control of the enviroment in which the hostage lives and then can use that control to reward the hostage for fullfilling his wishes.