Charlie Munger: Psychological Tendencies List05 Nov 2017
This is post 4/4 in a series about Charlie Munger's wisdom.
01. Reward and Punishment Superresponse Tendency
Everyone claims to understand it, yet it is still under-evaluated.
If you would persuade, appeal to interest and not to reason.
— Benjamin Franklin
Never, ever, think about something else when you should be thinking about the power of incentives.
Skinner (a famous psychologist) demonstrated again and again a great recurring, generalized behavioral algorithm in nature: "Repeat behavior that works." He also demonstrated that prompt rewards worked much better than delayed rewards in changing and maintaining behavior. And, once his rats and pigeons had conditioned reflexes, caused by food rewards, he found what withdrawal pattern of rewards kept the reflexive behavior longest in place: random distribution.
The general antidotes here are: (1) especially fear professional advice when it is especially good for the advisor; (2) learn and use the basic elements of your advisor's trade as you deal with your advisor; and (3) double check, disbelieve, or replace much of what you're told, to the degree that seems appropriate after objective thought.
Cost-plus-percent-of-cost contracts are evil: they incentivize contractors to drive up the costs.
Make it hard to cheat: cash register, good accounting practices. People will steal if it's very easy, and the stealing will become habitual. Make it hard to cheat, otherwise you're inflicting moral injury.
Dread, and avoid as much you can, rewarding people for what can be easily faked.
Punishments, of course, also strongly influence behavior and cognition, although not so flexibly and wonderfully as rewards.
02. Liking/Loving Tendency
The Liking/Loving Tendency acts as a conditioning device that makes the liker or lover tend to:
- ignore faults of and comply with wishes of, the object of his affection;
- favor people, products, and actions merely associated
with the object of his affection;
- distort other facts to facilitate love.
The phenomenon of liking and loving causing admiration also works in reverse. Admiration also causes or intensifies liking or love. This can be both positive, when liking someone admirable, or negative.
03. Disliking/Hating Tendency
We tend to disfavor people we already dislike and hate to level of irrationality. This results in:
- ignoring virtues of people we dislike;
- disliking people, products, and actions merely associated
with the object of our dislike;
- distorting facts in order to facilitate the hatred.
Sibling rivalry. Historical enmity.
The facts from both camps have very little overlap.
04. Doubt-Avoidance Tendency
The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision.
05. Inconsistency-Avoidance Tendency
An ounce of prevention is worth a pound of cure.
— Benjamin Franklin
Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it.
Also tending to be maintained in place by the anti-change tendency of the brain are one's previous conclusions, human loyalties, reputational identity, commitments, accepted role in a civilization, etc.
This tendency overlaps with what is known as confirmation bias.
One corollary of Inconsistency-Avoidance Tendency is that a person making big sacrifices in the course of assuming a new identity will intensify his devotion to the new identity. After all, it would be quite inconsistent behavior to make a large sacrifice for something that was no good.
As he was rising from obscurity in Philadelphia and wanted the approval of some important man, Franklin would often maneuver that man into doing Franklin some unimporrant favor like lending Franklin a book. Thereafter the man would admire and trust Franklin more because a nonadmired and nontrusted Franklin would be inconsistent with the appraisal implicit in lending Franklin the book.
When one is maneuvered into deliberately hurting some other person, one will tend to disapprove or even hate that person.
So strong is Inconsistency-Avoidance Tendency that it will often prevail after one has merely pretended to have some identity habit, or conclusion. Many a hypocrite is improved by his pretensions of virtue. And many a judge and juror, while pretending objectivity, is gaining objectivity.
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.
06. Curiosity Tendency
Simply put: curiosity helps.
07. Kantian Fairness Tendency
Also known as the golden rule:
do unto others as you would have them do unto you.
As an obverse consequence of such "fair-sharing" conduct, much reactive hostility occurs when fair-sharing is expected yet not provided.
08. Envy/Jealousy Tendency
It is not greed that drives the world, but envy.
09. Reciprocation Tendency
We tend to reciprocate favors and (perceived) slights.
You can always tell the man off tomorrow if it is such a good idea.
Reciprocating concessions: start with an outrageous demand then lower it to get a better chance of compliance than if you had asked outright.
10. Influence-from-Mere-Association Tendency
For instance, associating price with quality. Mistaking correlation for causation.
Other example: killing the messenger.
11. Simple, Pain-Avoiding Psychological Denial
Simple but often underestimated.
12: Excessive Self-Regard Tendency
Man mostly misappraises himself on the high side. This also extends to one person's major/minor possessions, friends, family.
The [endowment effect]: owned, a possession suddenly becomes worth more to him than he would pay if they were offered for sale and he didn't already own them.
When members of a clique exhibit self-regard tendency, they will select new members very much like themselves. The problems will get worse.
Excesses of self-regard often cause bad hiring decisions because employers grossly overappraise the worth of their own conclusions that rely on impressions in face-to-face contact. The correct antidote to this sort of folly is to underweigh face-to-face impressions and overweigh the applicant's past record.
13. Overoptimism Tendency
What a man wishes, that also will he believe.
14. Deprival-Superreaction Tendency
We gain less happiness from gaining 10$ than we lose from losing 10$. This is also known as [loss aversion].
Almost getting something then having it denied will hurt as much as if it was already owned.
Loss avertion is often framed by availability: getting angry over losing 10$ out of 300$ in our wallet when we have tens of thousands in the bank.
This tendency acts to protect religious/ideological views against nonbelievers, because the spread of nonbelievers' ideas and arguments will weaken the position/influence of the views. It leads to ideology-based groupthink and rejecting conflicting inputs.
It will be triggered even more strongly when the nonbeliever is a former believer: not only are the ideas challenged, but the group suffers the loss of one of its members, and there is fear that this nonbeliever will be extra-convincing because he was a former member. Hence the notion of heresy.
This tendency also interacts with 05. Inconsistency-Avoidance Tendency: (1) in groupthink, (2) in continuing to pour ressources in a fruitless venture.
This tendency explains gambling woes: it gives us an urge to get even after a loss, and increases the emotional impact of near wins (two 7s, one cherry on the slot machine where three 7s yield the jackpot).
15. Social-Proof Tendency
Young people are hardwired to respect their peers more than their parents. A trick parents can use: control the quality of the peers.
Because both bad and good behavior are made contagious by social proof, it is important to (1) stop bad behaviour before it spreads and (2) foster and display all good behaviour.
In social proof, it is not only action by others that misleads but also their inaction. In the presence of doubt, inaction by others becomes social proof that inaction is the right course.
Social-proof tendency often interacts in a perverse way with 08. Envy/Jealousy Tendency and 14. Deprival-Superreaction Tendency: e.g. two kids vying for the same toy, amongst a heap of almost identical toys.
16. Contrast-Misreaction Tendency
We tend to contrast things with other things that are close to hand. Paying a lot of money for something, because we just made a much (justifiably) bigger purchase. The realtor that shows awful houses before a merely bad one.
Also known as [anchoring] and related to 18. Availability-Misweighing Tendency.
Cognition, misled by tiny changes involving low contrast, will often miss a trend that is destiny.
A small leak will sink a great ship.
— Benjamin Franklin
17. Stress-Influence Tendency
Makes 15. Social-Proof Tendency more powerful.
When heavy, can cause depression.
Can disrupt pavlovian conditioning.
Pavlov noticed that the harder a dog was to break, the hardest it was to return to his pre-breakdown state. All dogs could be broken down, and he couldn't reverse a breakdown except through new stress.
18. Availability-Misweighing Tendency
Also known as [availability bias].
We overvalue evidence (or increase the importance of stuff) that is readily available.
Vivid images are more readily available.
In group environments, simple explanations of complex phenomena can rapidly gain currency and spread even if they’re wrong. This is known as availability cascade.
This tendency can be fought by:
- using checklists
- emphasizing discomfirming evidence
- using a devil's advocate
- not speaking first so as not to influence others
19. Use-It-or-Lose-It Tendency
All skills attenuate with disuse.
This tendency is tempered for the diligent: If a skill is raised to fluency, instead of merely being crammed in briefly to enable one to pass some test, then the skill (1) will be lost more slowly and (2) will come back faster when refreshed with new learning. These are not minor advantages, and a wise man engaged in learning some important skill will not stop until he is really fluent in it.
20. Drug Misinfluence Tendency
Obviously, and note one can be addicted to more than just chemicals — our body is more than happy to manufacture the chemicals for us if we provide it with the right inputs (see this video for instance).
21. Senescence-Misinfluence Tendencv
Practically no one is good at learning complex new skills when very old. But some people remain pretty good in maintaining intensely practiced old skills until late in life.
Continuous thinking and learning, done with joy can somewhat help delay what is inevitable.
22. Authority-Misinfluence Tendency
We also trust leaders in areas where they are not experts. This is known as the [halo effect].
23. Twaddle Tendency
Twaddle is idle talk, in particular talk about something the person isn't an expert in.
People that prattle incoherently are to be kept away from important work and from importunating people that do it.
24. Reason-Respecting Tendency
People accept directives better when the reasons are given.
Tell Who has to do What, Where, When, and Why.
Unfortunately also works with incorrect or invalid reasons.
25. Lollapalooza Tendency
The tendency to get extreme consequences from confluences of psychological tendencies acting in favor of a particular outcome.
Effects can either bolster each other (lollapallooza) or cancel each other out.