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Charlie Munger (Warren Buffett's partner) has kept a long-running list of psychological tendencies that commonly affect people's judgment. There's one item on t
by csallen 15y ago
Charlie Munger (Warren Buffett's partner) has kept a long-running list of psychological tendencies that commonly affect people's judgment. There's one item on this list that he's termed "Availability-Misweighing Tendency." In a nutshell, it's an observation that people tend to overweigh extra-vivid evidence, which (necessarily) means under-weighing evidence that isn't so vivid.
In this case, the extra-vivid evidence is the Instagram acquisition. It's been analyzed, or at least covered, by every blog and news network I can think of. I'm sure it's clogging most of our Twitter feeds. I even have friends and relatives who know nothing about tech but want to talk about it. It doesn't get much more vivid than that. And even if it wasn't receiving so much coverage, a billion dollars is enough money to be vivid in-and-of itself.
The point is, if you're re-thinking your business strategy or personal goals based on this news, you should tread carefully. The remedy to overweighing extra-vivid evidence is to always make it a point to seek out other side of the story. So I agree with Mark when he encourages "all other companies to do the harder work of finding out what happens in the 99.9% case, which is what is often never written in the annals of the tech news media."
- unimpressive 15y ago>Charlie Munger (Warren Buffett's partner) has kept a long-running list of psychological tendencies that commonly affect people's judgment. There's one item on this list that he's termed "Availability-Misweighing Tendency." In a nutshell, it's an observation that people tend to overweigh extra-vivid evidence, which (necessarily) means under-weighing evidence that isn't so vivid. http://en.wikipedia.org/wiki/Availability_heuristic http://en.wikipedia.org/wiki/Availability_heuristic >a long-running list of psychological tendencies that commonly affect people's judgment. These are usually called cognitive biases. Wikipedia has a long list, though Charlie's may be longer. (I haven't seen it.)
- csallen 15y agoWikipedia's list (http://en.wikipedia.org/wiki/List_of_cognitive_biases http://en.wikipedia.org/wiki/List_of_cognitive_biases) is indeed longer. Charlie claims to have about 100 models that he makes use of, but he's only published the ones he finds the most useful, and only a handful of those are cognitive biases.
- alecco 15y agoA great book on the subject is Thinking Fast and Slow.
- abiekatz 15y agoHere's the text of Munger's speech: http://www.loschmanagement.com/Market%20Comment/Client%20Letters/Client%20Letters%202003/client_letter_April_2003.htm http://www.loschmanagement.com/Market%20Comment/Client%20Let... It is well worth a read.
- csallen 15y agoHe actually revised the entire speech, added a few more principles, and turned it into a formal essay called "The Psychology of Human Misjudment". I'm not sure if it's online, but it appears as the last chapter in Poor Charlie's Almanack.
- kabuks 15y agoFound a copy here: http://law.indiana.edu/instruction/profession/doc/16_1.pdf http://law.indiana.edu/instruction/profession/doc/16_1.pdf