Charlie Munger’s 25 Psychological Tendencies of Human Misjudgement
I recently read “Poor Charlie’s Almanack,” a collection of speeches and talks given by Charlie Munger and compiled by Peter Kaufman. The title “Poor Charlie’s Almanack” is a tribute to Munger’s hero Benjamin Franklin, who wrote “Poor Richard’s Almanack.” He recently passed away on November 28th, 2023 about one month shy of his 100th birthday.
Munger was a businessman, investor and philanthropist. He was vice chairman of Berkshire Hathaway, the holding company controlled by Warren Buffet.
My favorite section of the book is called The Psychology of Human Misjudgement. This was originally a speech delivered by Munger to an audience at Harvard University in June 1995. If you’re interested, an audio recording of that talk can be found here:
Prior to the publication of the third edition of “Poor Charlie’s Almanack,” in 2005, Charlie made extensive revisions to the original talk.
In this revised talk, Munger explains why he has decided to put so much time and effort into sharing his wisdom with the world while receiving no financial or otherwise tangible benefit. He explains that his main reason is that, “I have fallen in love with my way of laying out psychology because it has been so useful for me.” He also explains that he is trying to emulate some of his heroes “bequest practices.”
The basis of the Psychology of Human Misjudgement is what Munger calls the “25 psychology-based tendencies.” They are generally useful, especially when viewed from an evolutionary lens, but can cause us to make mistakes or mental errors in our modern environment. This post is a summary of those 25 tendencies. I have taken excerpts from the book that I feel best summarize each tendency.
All of the quotes below are taken from “Poor Charlie’s Almanack,” Talk Eleven - The Psychology of Human Misjudgement. If you are interested in reading the entire section, it can be found here:
https://fs.blog/great-talks/psychology-human-misjudgment/
25 Psychological Tendencies of Human Misjudgement
Reward and Punishment Superresponse Tendency
“Never, ever, think about something else when you should be thinking about the power of incentives.”
From Poor Richard’s Almanack - “If you would persuade, appeal to interest and not to reason
“One of the most important consequences of incentive superpower is what I call ‘incentive- caused bias.’ A man has an acculturated nature making him a pretty decent fellow, and yet, driven both consciously and subconsciously by incentives, he drifts into immoral behavior in order to get what he wants, a result he facilitates by rationalizing his bad behavior.”
Liking/Loving Tendency
“What will a man naturally come to like and love, apart from his parent, spouse and child? Well, he will like and love being liked and loved. And so many a courtship competition will be won by a person displaying exceptional devotion, and man will generally strive, lifelong, for the affection and approval of many people not related to him.”
“One very practical consequence of Liking/ Loving Tendency is that it acts as a conditioning device that makes the liker or lover tend (1) to ignore faults of, and comply with wishes of, the object of his affection, (2) to favor people, products, and actions merely associated with the object of his affection (as we shall see when we get to ‘Influence-from-Mere-Association Tendency,’ and (3) to distort other facts to facilitate love.”
Disliking/Hating Tendency
“In a pattern obverse to Liking/Loving Tendency, the newly arrived human is also ‘born to dislike and hate’ as triggered by normal and abnormal triggering forces in its life. It is the same with most apes and monkeys.”
“Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues in the object of dislike, (2) dislike people, products, and actions merely associated with the object of his dislike, and (3) distort other facts to facilitate hatred.”
Doubt-Avoidance Tendency
“The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision.”
“It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt- Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors.”
Inconsistency-Avoidance Tendency
“The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance.”
“The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured. And the great rule that helps here is again from Franklin’s Poor Richard’s Almanack: ‘An ounce of prevention is worth a pound of cure.’ What Franklin is here indicating, in part, is that Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it.”
Curiosity Tendency
“In advanced human civilization, culture greatly increases the effectiveness of curiosity in advancing knowledge.”
“Curiosity, enhanced by the best of modern education (which is by definition a minority part in many places), much helps man to prevent or reduce bad consequences arising from other psychological tendencies. The curious are also provided with much fun and wisdom long after formal education has ended.”
Kantian Fairness Tendency
“Kant was famous for his ‘categorical imperative,’ a sort of a ‘golden rule’ that required humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody. And it is not too much to say that modern acculturated man displays, and expects from others, a lot of fairness as thus defined by Kant.”
“It is interesting how the world’s slavery was pretty well abolished during the last three centuries after being tolerated for a great many previous centuries during which it coexisted with the world’s major religions. My guess is that Kantian Fairness Tendency was a major contributor to this result.”
Envy/Jealously Tendency
“A member of a species designed through evolutionary process to want often-scarce food is going to be driven strongly toward getting food when it first sees food. And this is going to occur often and tend to create some conflict when the food is seen in the possession of another member of the same species. This is probably the evolutionary origin of the envy/jealousy Tendency that lies so deep in human nature.”
“My guess is that people widely and generally sense that labeling some position as driven by envy/ jealousy will be regarded as extremely insulting to the position taker, possibly more so when the diagnosis is correct than when it is wrong. And if calling a position ‘envy-driven’ is perceived as the equivalent of describing its holder as a childish mental basket case, then it is quite understandable how a general taboo has arisen.”
Reciprocation Tendency
“The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as extreme, as it is in apes, monkeys, dogs, and many less cognitively gifted animals. The tendency clearly facilitates group cooperation for the benefit of members. In this respect, it mimics much genetic programming of the social insects.”
“For instance, when an automobile salesman graciously steers you into a comfortable place to sit and gives you a cup of coffee, you are very likely being tricked, by this small courtesy alone, into parting with an extra five hundred dollars.”
Influence-from-Mere-Association Tendency
“Advertisers know about the power of mere association. You won’t see Coke advertised alongside some account of the death of a child. Instead, Coke ads picture life as happier than reality.”
“Some of the most important miscalculations come from what is accidentally associated with one’s past success, or one’s liking and loving, or one’s disliking and hating, which includes a natural hatred for bad news.”
“For instance, a man foolishly gambles in a casino and yet wins. This unlikely correlation causes him to try the casino again, or again and again, to his horrid detriment.”
Simple, Pain-Avoiding Psychological Denial
“This phenomenon first hit me hard in World War II when the superathlete, superstudent son of a family friend flew off over the Atlantic Ocean and never came back. His mother, who was a very sane woman, then refused to believe he was dead.”
“The reality is too painful to bear, so one distorts the facts until they become bearable. We all do that to some extent, often causing terrible problems. The tendency’s most extreme outcomes are usually mixed up with love, death, and chemical dependency.”
Excessive Self-Regard Tendency
“We all commonly observe the excessive self- regard of man. He mostly misappraises himself on the high side, like the ninety percent of Swedish drivers that judge themselves to be above average.”
“There is a famous passage somewhere in Tolstoy that illuminates the power of Excessive Self-Regard Tendency. According to Tolstoy, the worst criminals don’t appraise themselves as all that bad. They come to believe either (1) that they didn’t commit their crimes or (2) that, considering the pressures and disadvantages of their lives, it is understandable and forgivable that they behaved as they did and became what they became.”
Overoptimism Tendency
About three centuries before the birth of Christ, Demosthenes, the most famous Greek orator, said, ‘What a man wishes, that also will he believe.’”
Demosthenes, parsed out, was thus saying that man displays not only Simple, Pain-Avoiding Psychological Denial but also an excess of optimism even when he is already doing well.
Deprival-Superreaction Tendency
“The quantity of man’s pleasure from a ten- dollar gain does not exactly match the quantity of his displeasure from a ten-dollar loss. That is, the loss seems to hurt much more than the gain seems to help. Moreover, if a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away.”
“Deprival-Superreaction Tendency often protects ideological or religious views by triggering dislike and hatred directed toward vocal nonbelievers. This happens, in part, because the ideas of the nonbelievers, if they spread, will diminish the influence of views that are now supported by a comfortable environment including a strong belief-maintenance system.”
Social-Proof Tendency
“The otherwise complex behavior of man is much simplified when he automatically thinks and does what he observes to be thought and done around him. And such followership often works fine. For instance, what simpler way could there be to find out how to walk to a big football game in a strange city than by following the flow of the crowd. For some such reason, man’s evolution left him with Social-Proof Tendency, an automatic tendency to think and act as he sees others around him thinking and acting.”
“When will Social-Proof Tendency be most easily triggered? Here the answer is clear from many experiments: Triggering most readily occurs in the presence of puzzlement or stress, and particularly when both exist.”
Contrast-Misreaction Tendency
“Because the nervous system of man does not naturally measure in absolute scientific units, it must instead rely on something simpler. The eyes have a solution that limits their programming needs: the contrast in what is seen is registered. And as in sight, so does it go, largely, in the other senses. Moreover, as perception goes, so goes cognition. The result is man’s Contrast-Misreaction Tendency.”
“Few psychological tendencies do more damage to correct thinking. Small-scale damages involve instances such as man’s buying an overpriced $1,000 leather dashboard merely because the price is so low compared to his concurrent purchase of a $65,000 car.”
Stress-Influence Tendency
“Everyone recognizes that sudden stress, for instance from a threat, will cause a rush of adrenaline in the human body, prompting faster and more extreme reaction. And everyone who has taken Psych 101 knows that stress makes Social-Proof Tendency more powerful.”
“In a phenomenon less well recognized but still widely known, light stress can slightly improve performance—say, in examinations—whereas heavy stress causes dysfunction.”
Availability-Misweighing Tendency
“This mental tendency echoes the words of the song: “When I’m not near the girl I love, I love the girl I’m near.” Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it.”
“The main antidote to miscues from Availability-Misweighing Tendency often involve procedures, including use of checklists, which are almost always helpful.”
Use-It-or-Lose-It Tendency
“All skills attenuate with disuse. I was a whiz at calculus until age twenty, after which the skill was soon obliterated by total nonuse. The right antidote to such a loss is to make use of the functional equivalent of the aircraft simulator employed in pilot training. This allows a pilot to continuously practice all of the rarely used skills that he can’t afford to lose.”
“Throughout his life, a wise man engages in practice of all his useful, rarely used skills, many of them outside his discipline, as a sort of duty to his better self. If he reduces the number of skills he practices and, therefore, the number of skills he retains, he will naturally drift into error from man with a hammer tendency.”
Drug-Misinfluence Tendency
“This tendency’s destructive power is so widely known to be intense, with frequent tragic consequences for cognition and the outcome of life, that it needs no discussion here to supplement that previously given under ‘Simple, Pain-Avoiding Psychological Denial.’”
Senescence-Misinfluence Tendency
“With advanced age, there comes a natural cognitive decay, differing among individuals in the earliness of its arrival and the speed of its progression. Practically no one is good at learning complex new skills when very old. But some people remain pretty good in maintaining intensely practiced old skills until late in life, as one can notice in many a bridge tournament.”
“Continuous thinking and learning, done with joy, can somewhat help delay what is inevitable.”
Authority-Misinfluence Tendency
“Living in dominance hierarchies as he does, like all his ancestors before him, man was born mostly to follow leaders, with only a few people doing the leading. And so, human society is formally organized into dominance hierarchies, with their culture augmenting the natural follow-the-leader tendency of man.”
“But automatic as most human reactions are, with the tendency to follow leaders being no exception, man is often destined to suffer greatly when the leader is wrong or when his leader’s ideas don’t get through properly in the bustle of life and are misunderstood”
Twaddle Tendency
“Man, as a social animal who has the gift of language, is born to prattle and to pour out twaddle that does much damage when serious work is being attempted. Some people produce copious amounts of twaddle and others very little.”
“A rightly famous Caltech engineering professor, exhibiting more insight than tact, once expressed his version of this idea as follows: ‘The principal job of an academic administration is to keep the people who don’t matter from interfering with the work of the people that do.’”
Reason-Respecting Tendency
“There is in man, particularly one in an advanced culture, a natural love of accurate cognition and a joy in its exercise. This accounts for the widespread popularity of crossword puzzles, other puzzles, and bridge and chess columns, as well as all games requiring mental skill.”
“This tendency has an obvious implication. It makes man especially prone to learn well when a would-be teacher gives correct reasons for what is taught, instead of simply laying out the desired belief ex cathedra with no reasons given. Few practices, therefore, are wiser than not only thinking through reasons before giving orders but also communicating these reasons to the recipient of the order.”
Lollapalooza Tendency—The Tendency to Get Extreme Consequences from Confluences of Psychology Tendencies Acting in Favor of a Particular Outcome
“This tendency was not in any of the psychology texts I once examined, at least in any coherent fashion, yet it dominates life. It accounts for the extreme result in the Milgram experiment and the extreme success of some cults that have stumbled through practice evolution into bringing pressure from many psychological tendencies to bear at the same time on conversion targets. The targets vary in susceptibility, like the dogs Pavlov worked with in his old age, but some of the minds that are targeted simply snap into zombiedom under cult pressure. Indeed, that is one cult’s name for the conversion phenomenon: snapping.”
If you made it this far, congratulations! You have done yourself a great service. If you enjoyed this, I would highly encourage you to read the entire section of the book, which is available for free at:
https://fs.blog/great-talks/psychology-human-misjudgment/
Thank you for reading! Please let me know what you think, all feedback is welcome.
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Take care.