Eat Your Vegetables: December 2021

Friday, December 17, 2021

Charlie Munger -- The Psychology of Human Misjudgement

The vid is basic but the audio is worth a listen. This is (pretty much) a complete talk he gave at Harvard in 1995.

Someone on You Tube (good work, internet) even gives the Cliff Notes:

Timestamp for 24 standard causes of human misjudgment: 1) 3:00 - Bias from reinforcement and incentive 2) 5:08 - Man with a hammer syndrome 3) 6:09 - Psychological denial (reality is too painful to bear, so you just distort it until it’s bearable) 4) 6:57 - Agency cost (too trusting of advisors who don't know more than you) 5) 10:18 - Bias from consistency and commitment tendency / Self-confirmation tendency (hard to change your mind once emotionally committed to an idea) 5.5) 11:28 - (Related to previous point) - Bias from cognitive dissonance (caused by echo chambers) 6) 12:31 - Bias from pavlovian association / past correlation for decision making 7) 19:49 - Bias from reciprocation tendency (ask for a lot and then back off to a lower offer) 8) 24:04 - Bias from over-influence of social proof 9) 26:48 - Bias from contrast (lowering/distorting your standards by comparing two options that are equally bad - or having a "grass greener on the other side" mentality by comparing to an unrealistically high standard) 10) 30:13 - Over-influenced by authority 11) 31:50 - Bias from deprival super reactions syndrome (sunk cost fallacy) 12) 35:00 - Bias caused by envy 13) 35:51 - Bias from chemical dependency (addictions) 14) 36:15 - Bias from mis-gambling compulsion (I made the choices so the odds must be better) [numbering gets confusing at this point] But these are my personal breakpoints 15) 38:36 - Bias from liking distortion (over-influence/mislead by someone we like - including ourselves) 16) 38:48 - Bias from disliking distortion (under-influence by someone we dislike - especially if they are right and we are wrong) 17) 42:19 - Bias from the non mathematical nature of the human brain (too stupid to understand maths and too lazy to learn) 18) 44:00 - Bias from fear of scarcity 18.5) 45:50 - Don't trust someone who says "I've never done it before and I'll never do it again" 19) 46:34 - Bias from sympathy 20) 49:48 - Bias from over-influence and extra evidence 21) 51:00 - Bias caused by mental confusion caused by information not arrayed in the mind to create sound generalizations (you memorized new information, but you haven't learned it or know how to make it useful. Test new information by answering "why") 22) 50:49 - Starts at 53:16 - Stressed induced mental changes (small/large, temporary/permanent) 23) 54:20 - Common mental illnesses and declines temporary and permanent and quitting the tendency to lose ability through disuse (Charlie skipped this explanation: says he doesn't have time for it) 24) 54:28 - Say-something syndrome (difficult to explain new concepts to others who lack "first principles") Questions: 1) 55:45 - What happens when these standard tendencies combine? 2) 1:01:01 - Isn't this list topological (meaning is there overlap and some item is a combination of other items) 3) 1:01:15 - Are these (biological) tendencies generally good or bad? 4) 1:07:31 - What special knowledge problems lie buried in the thought system indicated by the list 5) 1:09:00 - How should the best parts of psychology and economics interrelate in an enlightened economists minds Extra 11:56 - It's very important to not put your brain in chains too young by what you shout out (by joining echo chambers) 1:05:54 - Confirmation bias