8 ms·

Charlie Munger – The Psychology of Human Misjudgment

134 points by mrkibo 9y ago

theartfuldodger 9y ago
https://www.farnamstreetblog.com/2013/02/the-psychology-of-human-misjudgement/ https://www.farnamstreetblog.com/2013/02/the-psychology-of-h...
jczhang 9y ago
Anyone have a more readable / cliff notes version?
- JamesLeonis 9y ago
  The most readable copy I have. http://tarangshah.com/to-read/MungerMisjudgement.html http://tarangshah.com/to-read/MungerMisjudgement.html
  - theyregreat 9y ago
    Thanks. I hate these pseudo-PDF, book shovelware sites that paywall/proprietarize/socalize content to be useless on readers and generally get in the way.
    - melling 9y ago
      Is there a copyright? Can this be ocr’ed?
- rglover 9y ago
  Probably not verbatim but same concepts: https://www.youtube.com/watch?v=pqzcCfUglws https://www.youtube.com/watch?v=pqzcCfUglws.
- denzil_correa 9y ago
  PDF version : http://web.archive.org/web/20151004200748/http://law.indiana.edu/instruction/profession/doc/16_1.pdf http://web.archive.org/web/20151004200748/http://law.indiana... I got it from the comments!
ThrustVectoring 9y ago
>Never, ever, think about something else when you should be thinking about the power of incentives. The article is worth reading for this alone.
Animats 9y ago
That's a fun read. The section on incentives is useful. But he idolizes Patterson, the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders. "Always tell us the bad news promptly. Good news can wait" - Berkshire policy. "A job hunter who is a marvelous 'presenter' often causes grave danger under modern executive-search practice." - referring to how Carly Fiorina tanked HP. "An excess of optimism is the normal human condition" - cited to Demosthenes. Didn't know that went back that far. "Deprival Superreaction" - the asymmetry between gain and loss is well known, but not under that name.
- steveeq1 9y ago
  > "First-conclusion bias". Huge problem with cops. Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes us to believe the problem is far bigger than it actually is, probabilistically speaking: https://i.imgur.com/tOTcCRH.jpg https://i.imgur.com/tOTcCRH.jpg . (Mind you, those stats are "white men", much less "white men that happen to be policemen") . Dramatic/emotional information is somehow perceived to be a bigger threat than "real, actual statistcal risk", in other words. Daniel Kahneman also covers this topic on his excellent "Thinking Fast and Slow": https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow#Availability https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow#Availa... which I also recommend.
  - random314 9y ago
    It is a fairly common subterfuge to replace law-enforcement killing blacks statistics with statistics of white-on-black crime. There have been several studies that demonstrate that the likelihood of death from an LEO encounter increases with your melanin content http://www.independent.co.uk/news/world/americas/black-americans-shot-dead-police-shooting-twice-likely-white-people-us-african-american-a7567471.html http://www.independent.co.uk/news/world/americas/black-ameri...
steveeq1 9y ago
For those of you who liked this speech, check out his book "Poor Charlie's Almanack": https://www.poorcharliesalmanack.com/ https://www.poorcharliesalmanack.com/ Which contains that speech and other talks that he has given over the years. It's a beautifully illustrated book chock full of his witticisms. I enjoyed it tremendously. Also check out "Seeking Wisdom" (from the same publisher and website). The book was listed as a favorite of Nassim Taleb (whom I am also a fan of). It's one of my favorite books, personally.
scandox 9y ago
> ordinarily when you try to use your knowledge of psychological tendencies in the artful manipulation of someone whose trust you need, you will be making both a moral and prudential error. The moral error is obvious. The prudential error comes because many intelligent people, targeted for conscious manipulation are likely to figure out what you are trying to do and resent your action. Seems to me then the obvious moral error extends to less intelligent (so regarded) individuals and to groups of individuals of all stripes. Which presumably means Mr Munger has never utilised the methods he has researched so digligently.
melling 9y ago
Here’s an older post with some good comments: https://news.ycombinator.com/item?id=12159242 https://news.ycombinator.com/item?id=12159242
HiroshiSan 9y ago
Can someone explain this line to me: "As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort." Is he talking about conceptual understanding vs rote memorization? What theory is he talking about?
- Rzor 9y ago
  Perhaps not rote memorization, but figuring things out by tinkering without a mental model or conceptual understanding as you say.
beautifulfreak 9y ago
I was afraid that I would end up "with no brain at all, just a neck that had haired over." Heh.

134 points by mrkibo 9y ago

https://www.farnamstreetblog.com/2013/02/the-psychology-of-human-misjudgement/ https://www.farnamstreetblog.com/2013/02/the-psychology-of-h...

jczhang 9y ago

Anyone have a more readable / cliff notes version?

JamesLeonis 9y ago
The most readable copy I have. http://tarangshah.com/to-read/MungerMisjudgement.html http://tarangshah.com/to-read/MungerMisjudgement.html
- theyregreat 9y ago
  Thanks. I hate these pseudo-PDF, book shovelware sites that paywall/proprietarize/socalize content to be useless on readers and generally get in the way.
  - melling 9y ago
    Is there a copyright? Can this be ocr’ed?
rglover 9y ago
Probably not verbatim but same concepts: https://www.youtube.com/watch?v=pqzcCfUglws https://www.youtube.com/watch?v=pqzcCfUglws.
denzil_correa 9y ago
PDF version : http://web.archive.org/web/20151004200748/http://law.indiana.edu/instruction/profession/doc/16_1.pdf http://web.archive.org/web/20151004200748/http://law.indiana... I got it from the comments!

ThrustVectoring 9y ago

>Never, ever, think about something else when you should be thinking about the power of incentives. The article is worth reading for this alone.

Animats 9y ago

That's a fun read. The section on incentives is useful. But he idolizes Patterson, the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders. "Always tell us the bad news promptly. Good news can wait" - Berkshire policy. "A job hunter who is a marvelous 'presenter' often causes grave danger under modern executive-search practice." - referring to how Carly Fiorina tanked HP. "An excess of optimism is the normal human condition" - cited to Demosthenes. Didn't know that went back that far. "Deprival Superreaction" - the asymmetry between gain and loss is well known, but not under that name.

steveeq1 9y ago
> "First-conclusion bias". Huge problem with cops. Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes us to believe the problem is far bigger than it actually is, probabilistically speaking: https://i.imgur.com/tOTcCRH.jpg https://i.imgur.com/tOTcCRH.jpg . (Mind you, those stats are "white men", much less "white men that happen to be policemen") . Dramatic/emotional information is somehow perceived to be a bigger threat than "real, actual statistcal risk", in other words. Daniel Kahneman also covers this topic on his excellent "Thinking Fast and Slow": https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow#Availability https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow#Availa... which I also recommend.
- random314 9y ago
  It is a fairly common subterfuge to replace law-enforcement killing blacks statistics with statistics of white-on-black crime. There have been several studies that demonstrate that the likelihood of death from an LEO encounter increases with your melanin content http://www.independent.co.uk/news/world/americas/black-americans-shot-dead-police-shooting-twice-likely-white-people-us-african-american-a7567471.html http://www.independent.co.uk/news/world/americas/black-ameri...

steveeq1 9y ago

For those of you who liked this speech, check out his book "Poor Charlie's Almanack": https://www.poorcharliesalmanack.com/ https://www.poorcharliesalmanack.com/ Which contains that speech and other talks that he has given over the years. It's a beautifully illustrated book chock full of his witticisms. I enjoyed it tremendously. Also check out "Seeking Wisdom" (from the same publisher and website). The book was listed as a favorite of Nassim Taleb (whom I am also a fan of). It's one of my favorite books, personally.

scandox 9y ago

> ordinarily when you try to use your knowledge of psychological tendencies in the artful manipulation of someone whose trust you need, you will be making both a moral and prudential error. The moral error is obvious. The prudential error comes because many intelligent people, targeted for conscious manipulation are likely to figure out what you are trying to do and resent your action. Seems to me then the obvious moral error extends to less intelligent (so regarded) individuals and to groups of individuals of all stripes. Which presumably means Mr Munger has never utilised the methods he has researched so digligently.

melling 9y ago

Here’s an older post with some good comments: https://news.ycombinator.com/item?id=12159242 https://news.ycombinator.com/item?id=12159242

HiroshiSan 9y ago

Can someone explain this line to me: "As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort." Is he talking about conceptual understanding vs rote memorization? What theory is he talking about?

Rzor 9y ago
Perhaps not rote memorization, but figuring things out by tinkering without a mental model or conceptual understanding as you say.

beautifulfreak 9y ago

I was afraid that I would end up "with no brain at all, just a neck that had haired over." Heh.