The Psychology of Human Misjudgment by Charlie Munger

CM1“The elementary part of psychology ‑ the psychology of misjudgment, as I call it ‑ is a terribly important thing to learn. There are about 20 little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important. Terribly smart people make totally bonkers mistakes by failing to pay heed to it. In fact, I’ve done it several times during the last two or three years in a very important way. You never get totally over making silly mistakes. There’s another saying that comes from Pascal which I’ve always considered o­ne of the really accurate observations in the history of thought. Pascal said in essence, ‘The mind of man at o­ne and the same time is both the glory and the shame of the universe.'” — Charlie Munger

Charlie Munger’s standard causes of Human Misjudgement is truly great stuff, and something I wish everyone had the privilege to get in touch with.

The audio file below contains the often referred to speech by Charlie Munger on the psychology of human misjudgment given to an audience at Harvard University back in 1995. In his speech, Charlie talks about some of the different kinds of human misjudgments that he has encountered through his life.

The following is a summary of Charlie’s 25 standard causes of human misjudgments (see link in the end of this post), revised by himself in 2005 and included in Poor Charlie’s Almanack – The Wit and Wisdom of Charles T. Munger:

  1. Reward and Punishment Superresponse Tendency
  2. Liking/Loving Tendency
  3. Disliking/Hating Tendency
  4. Doubt-Avoidance Tendency
  5. Inconsistency-Avoidance Tendency
  6. Curiosity Tendency
  7. Kantian Fairness Tendency
  8. Envy/Jealousy Tendency
  9. Reciprocation Tendency
  10. Influence-from-Mere Association Tendency
  11. Simple, Pain-Avoiding Psychological Denial
  12. Excessive Self-Regard Tendency
  13. Overoptimism Tendency
  14. Deprival Superreaction Tendency
  15. Social-Proof Tendency
  16. Contrast-Misreaction Tendency
  17. Stress-Influence Tendency
  18. Availability-Misweighing Tendency
  19. Use-It-or-Lose-It Tendency
  20. Drug-Misinfluence Tendency
  21. Senescence-Misinfluence Tendency
  22. Authority-Misinfluence Tendency
  23. Twaddle Tendency
  24. Reason-Respecting Tendency
  25. Lollapalooza Tendency – The Tendency to Get Extreme Confluences of Psychological Tendencies Acting in Favor of a Particular Outcome

See here for full text in PDF.

See here for audio file.

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