Micael, is it possible to download the annotated version of the paper from Fermat's Library itself? You can find a pdf to this paper here: [The Psychology of Human Misjudgment](http://web.archive.org/web/20151004200748/http://law.indiana.edu/instruction/profession/doc/16_1.pdf) Listen to Charlie Mungers talk here: [](https://www.youtube.com/watch?v=pqzcCfUglws) Instead of developing good judgement from scratch Munger decides to study bad judgement and good judgement will arise as a result of avoiding bad decisions. **Fun fact: One share of Berkshire class A stock is worth $273,700 (2017).** Here is a summary of Robert B. Cialdini's book [Influence: The Psychology of Persuasion](https://ashishb.net/book-summary/book-summary-influence-the-psychology-of-persuasion-by-robert-b-cialdini/) ### 7. Kantian Fairness Tendency > ***"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."*** Some interesting takeaways: - When human beings are not treated fairly, they often become very angry/frustrated. - Reciprocal courtesy happens when humans follow behaviors that, if followed by all others, make the surrounding human system work best for everybody. ### 5. Inconsistency-Avoidance Tendency > ***"It is important not to thus put one's brain in chains before one has come anywhere near his full potentiality as a rational person."­*** Some interesting takeaways: - Human beings are reluctant of change. - Changing habits is really hard, even when you know that habits are bad. - Challenge your ideas/beliefs. Always consider counterarguments to your position before making decisions. ### 8. Envy/Jealousy Tendency > ***"It is not greed that drives the world, but envy."­*** Some interesting takeaways: - Humans have a natural self-selected tendency to be jealous/envious. - Envy/Jealousy can lead to resentment and hate. - The points discussed previously "Kantian fairness tendency" opposes Envy/Jealousy Tendency. - Be mindful of your jealous or envious ­tendencies to opposed them in order to avoid bad judgment. ### 2. Liking/Loving Tendency > ***"...man will generally starve, lifelong, for the affection and approval of many people not related to him." ­*** Some interesting takeaways: - Every human being has a desire to be liked by others. Recognise your desire to be liked. - Liking/Loving tendencies will distort your logic views to favor anything related to the object of affection. - People will tend to ignore the faults of the object of affection. ### 11. Simple, Pain-Avoiding Psychological Denial > ***"It is not necessary to hope in order to persevere."­*** Some interesting takeaways: - Humans tend to distort reality in order to feel better. - Denial is the first stage of human grief. Humans deny objective truths to avoid pain. - You should always be open to the facts of any situation so you can avoid bad decisions. ### 12. Excessive Self-Regard Tendency > ***"All man's decisions are suddenly regarded by him as better than would have been the case just before he made them."­*** Some interesting takeaways: - Self-regard makes us strongly prefer/like people that are like ourselves. - Bad decisions are really hard to avoid/amend when dysfunctional groups dominated by Excessive Self-Regard Tendency select new members that are very much like themselves. - Be more objective when you think about yourself, your ideas, your family, and friends. This is a fascinating story. You can learn more about the World War I Christmas Truce here: [Weihnachtsfrieden; Trêve de Noël.](https://en.wikipedia.org/wiki/Christmas_truce) ### 14. Deprival-Superreaction Tendency > ***"The quantity of a man’s pleasure from a ten dollar gain does not exactly match the quantity of his displeasure from a ten dollar loss."­*** Some interesting takeaways: - The pleasure gain from earning $10 is less than the displeasure from losing $10 - Almost getting a reward and then having it jerked away makes the loss feel as though he had owned it the whole time - Deprival-Superreaction Tendency is triggered in gamblers when they suffer a lost. A lot of near misses trigger Deprival-Superreaction Tendency and push the gambler to lose more money. ### 15. Social-Proof Tendency > ***"When will the Social­Proof 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."­*** Some interesting takeaways: - Human beings think and do what they observe around them. (Monkey-see, monkey-do) - Normative, imitative behavior helps social cohesion. - Learn not to ignore examples from others when they are wrong. - Stop bad behavior before it spreads. ### 4. Doubt-Avoidance Tendency > ***"The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. [...] 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."­*** Some interesting takeaways: - Doubt avoidance will make you jump to conclusions. You will make decisions without full consideration of all facts. - Puzzlement and stress are strong triggers of doubt-avoidance tendency. - Humans perpetuate poor decisions and bad behavior because doubting your current path causes more turmoil and stress. ### 17. Stress-Influence Tendency > ***"The heavy­handed imposition of stress might be the only reversal method that would work to remedy one of the worst evils imaginable: a stolen mind."­*** Some interesting takeaways: - Light stress improves performances, and heavy stress causes dysfunction. - Stress will induce bad behavior. When we are stressed we rely on faulty heuristics rather than methodical thinking. - To counter this behavior try to be mindful and maintain calm. You may have more time than you believe. - When you feel overwhelmed, take a step back and think before making a decision. ### 20. 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"­*** Some interesting takeaways: - Avoid drugs that are destructive for cognition. - Addictions cause destructive human behavior. ### 21. Senescence-Misinfluence Tendency > ***"Some people remain pretty good in maintaining intensely practiced old skills until late in life..."­*** Some interesting takeaways: - As you get older it becomes harder to retain and learn new skills. - If you foster continuous learning you can delay the deterioration of your skills. ### 23. 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 interesting takeaways: - Twaddle = foolish speech or writing - Know your circle of competence. When you are outside it, gather more information before making a decision. - [Dunning-Kruger effect](https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect) ### 13. Overoptimism Tendency > ***"Demosthenes, the most famous Greek orator, said, 'What man wishes, that also will he believe' "­*** Some interesting takeaways: - Excess optimism is a normal human condition. - We tend to be foolishly optimistic and overestimate how much control we have control over future events. - Use simple probability and statistics when making decisions. ### 24. Reason-Respecting Tendency > ***"Reason-Respecting Tendency is so strong that even a person’s giving of meaningless or incorrect reasons will increase compliance with his orders and requests."­*** Some interesting takeaways: - We tend to learn and work better when given the correct reasons for why to do something. - Be able to explain your beliefs to others with logic and facts/evidence. - Think through all your reasons before making a decision. How do we download this paper? ### 6. Curiosity Tendency > ***"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."­*** Some interesting takeaways: - Humans are a curious species, even more so than monkeys and mammals. - Curiosity helps prevent and counter the negative effects of our psychological tendencies. ### 22. Authority-Misinfluence Tendency > ***"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. And so, we find much miscognition from man’s Authority-Misinfluence Tendency."­*** Some interesting takeaways: - Human beings have a natural tendency to follow leaders. - We live in hierarchical societies. - We tend to trust leaders in areas they are not experts in. This leads to bad outcomes. - Be aware of your bias, and avoid thinking "well this person couldn't possibly be wrong" ### 10. Influence-from-Mere-Association Tendency > ***" Carefully examine each past success, looking for accidental, non­causative factors associated with such success that will tend to mislead as one appraises odds implicit in a proposed new undertaking."­*** Some interesting takeaways: - Association is a powerful human trigger. Advertisers know this and take it into account when crafting their marketing campaigns. - This tendency can be harmful and induce you into bad decisions because of the wrong attribution of previous success when they could be due to luck. - In order to counter this tendency make a habit of welcoming bad news. Their motto at Berkshire is: *"Always tell us the bad news promptly. It is only the good news that can wait."* ### 3. Disliking/Hating Tendency > ***"the long history of man contains almost continuous war"­*** Some interesting takeaways: - Opposite of the Liking/Loving Tendency - Disliking tendencies will distort your logic views associated with the object of dislike. You will ignore values and distort facts. - You will make judgments without considering full facts, thus jump to wrong conclusions. ### 19. Use-It-or-Lose-It Tendency > ***"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."­*** Some interesting takeaways: - Your skills will attenuate with disuse. You will only maintain your most valuable skills with daily practice. - Learn your skills to fluency to better retain and recall them. - Continuously practice the skills you value the most. ### 9. Reciprocation Tendency > ***"The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as it is in apes, dogs, and many less cognitively gifted animals. The tendency facilitates group cooperation for the benefit of members."­*** Some interesting takeaways: - Human beings are wired to reciprocate, both favorably and unfavorably. - Reciprocation tendency can be powerful manipulation tool in negotiations. For example asking someone for a huge favor (and getting rejected) then making a concession increases the compliance rate. - Train yourself to defer reactions. Wait several hours before reacting, this will help you avoid reciprocation tendency. *"You can always tell the man off tomorrow if it is such a good idea."* ### 16. Contrast-Misreaction Tendency > ***" 'A small leak will sink a great ship.' The utility of the aphorism is large precisely because the brain so often misses the functional equivalent of a small leak in a great ship. "­*** Some interesting takeaways: - "Few psychological tendencies do more damage to correct thinking" - C. Munger - Small imperceptible differences accumulating over time will make a huge difference in the end. - Anchoring: Humans use irrelevant information as a reference for evaluating or estimating some unknown value or information. Participants in the stock market with an anchoring bias tend to hold investments that have lost value because they have anchored their fair value estimate to the original price rather than to fundamentals. - To counter this behavior think of the absolute value of an item. Train yourself to detect contrasts and it will allow for simpler cognition, or faster recognizing of danger. ### 18. Availability-Misweighing Tendency > ***" 'When I’m not near the girl I love, I love the girl I’m near. -­ Frank Sinatra' "­*** Some interesting takeaways: - Humans tend to overemphasize information that is the most available and vivid. - Brainstorm all possibilities and consider all options before making a decision. - Like Darwin, train yourself to disprove your points. Charles Thomas Munger was Warren Buffett's irreverent business partner, and vice chairman of Berkshire Hathaway. He was an investor, businessman, and philanthropist. Charlie Munger is considered one of the great minds of the 20th century known for introducing the concept of ***"elementary, worldly wisdom"***. Munger's elementary worldly wisdom consists of a set of mental models framed as a latticework to help solve critical business problems.  ### 25. Lollapalooza Tendency... > ***"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."­*** Some interesting takeaways: - The confluence of multiple tendencies leads to extreme consequences. - You should tackle tendencies individually in order to avoid extreme consequences. > ***"To a man with a hammer, everything looks like a nail."*** **Man-with-a-hammer**, also known as the **law of the instrument**, or **Maslow's hammer** is a cognitive bias that states that if you only have one skill (or rely heavily on a single skill) then you will use that skill to solve every problem. You can learn more here: [Wikipedia - Law of the instrument](https://en.wikipedia.org/wiki/Law_of_the_instrument) ### 1. Reward and Punishment Superresponse Tendency > ***"Never, ever, think about something else when you should be thinking about the power of incentives"*** Some interesting takeaways: - Munger believes that the power of incentives is often underestimated. Incentives are all powerful in driving human behavior. - Incentive Caused Bias happens when someone has a vested interest in something specific they will tend to act with that interest in mind. - Influence yourself and others. Self-interest and rewards drive behavior and behavior change. - Bad behaviors are strongly habit-forming because the of the prompt rewards they provide. > ***"If you would persuade, appeal to interest and not to reason."*** – Benjamin Franklin