The Psychology of Human Misjudgment

Lollapalooza and more Munger-ism.

In 1995, Charles T. Munger gave a speech at Harvard University, titled "The Psychology of Human Misjudgment".

In this talk, Charlie Munger spoke about the framework for decision making and the factors contributing to misjudgements - 100% of what he said at that point is applicable even today.

As the world mourns the death of legendary Charlie Munger (his philosophies, i.e. Mungerism have shaped a lot of my decision-making skills), here is sharing big ideas from his talk at Harvard as a tribute to his long-term thinking which effectively made him what he was, i.e. Charlie Munger!

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Each idea explores a different psychological tendency that influences human behavior and decision-making.

Reward and Punishment Super response Tendency: This principle highlights the extreme influence of rewards and punishments on human behavior.

People often react disproportionately to incentives, leading to irrational decisions and actions. This tendency underscores the power of both positive reinforcement and negative consequences in shaping behavior.

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Liking/Loving Tendency: This concept illustrates how affection and emotional attachment can significantly skew our judgments and decisions.

Our preferences, opinions, and choices are often biased by our feelings of fondness towards people, objects, or ideas, leading to partiality and favoritism.

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Disliking/Hating Tendency: In contrast to the Liking/Loving Tendency, this principle deals with the strong impact of aversion and animosity on our decisions.

Our dislikes and hatreds can cloud our judgment, leading to biased evaluations and choices.

Doubt-Avoidance Tendency: This tendency describes the human inclination to make quick decisions to escape the discomfort of uncertainty.

People prefer a flawed decision over the ambiguity and anxiety that comes with doubt, often leading to hasty and ill-considered choices.

Inconsistency-Avoidance Tendency: Humans have a strong desire to remain consistent with their beliefs and past decisions.

This tendency leads to resistance to change and an aversion to admitting mistakes or reevaluating past choices.

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Curiosity Tendency: This principle recognizes the innate human urge to know and understand, driving exploration, learning, and the pursuit of new information. Curiosity plays a vital role in innovation and problem-solving.

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Also read: 50 Charlie Munger quotes that are funny..and hit you hard.

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Kantian Fairness Tendency: Derived from Immanuel Kant’s philosophy, this tendency refers to the human inclination towards fair and just treatment in interactions. It underscores the importance of fairness in maintaining social harmony and cooperation.