Munger himself compiled a list of common mistakes people make, and they’re not just about investing.
Many lists of the famous sayings of Charlie Munger are being shared after the investing legend’s death at age 99.
Munger himself produced a listicle of sorts, “The Psychology of Human Misjudgment,” chronicling 25 common errors. He rewrote it in 2005 and it’s freely available here.
The vice chairman of Berkshire Hathaway
BRK.B,
and the long-time chairman of the Daily Journal
DJCO,
didn’t just write about investing. “Mediations between Israelis and Palestinians are difficult because facts in one side’s history overlap very little with facts from the other side’s,” he wrote.
Munger’s essay discusses topics ranging from Albert Einstein’s inability to accept quantum mechanics to China’s successful prison interrogations during the Korean War to Sam Walton’s prohibitions on his purchasing agents.
Munger’s down-to-earth, acerbic style comes through in the essay.
“I drew this beautiful woman as my dinner partner many years ago,” he wrote. “I’d never seen her before. She was married to a prominent Los Angeles man. She sat down next to me, turned her beautiful face up, and said, ‘Charlie, what one word accounts for your remarkable success in life?’ I knew I was being manipulated by a practiced routine, and I just loved it. I never see this woman without a little lift in my spirits. And, by the way, I told her I was rational,” he wrote.
Here is the full list of common errors. And if they aren’t obvious, and they probably won’t be, you’ll just have to read the essay.
- Reward and Punishment Superresponse Tendency
- Liking/Loving Tendency
- Disliking/Hating Tendency
- Doubt-Avoidance Tendency
- Inconsistency-Avoidance Tendency
- Curiosity Tendency
- Kantian Fairness Tendency
- Envy/Jealously Tendency
- Reciprocation Tendency
- Influence-from-Mere-Association Tendency
- Simple, Pain-Avoiding Psychological Denial
- Excessive Self-Regard Tendency
- Overoptimism Tendency
- Deprival-Superreaction Tendency
- Social-Proof Tendency
- Contrast-Misreaction Tendency
- Stress-Influence Tendency
- Availability-Misweighing Tendency
- Use-It-or-Lose-It Tendency
- Drug-Misinfluence Tendency
- Senescence-Misinfluence Tendency
- Authority-Misinfluence Tendency
- Twaddle Tendency
- Reason-Respecting Tendency
- Lollapalooza Tendency—The Tendency to Get Extreme Consequences from Confluences of Psychology Tendencies Acting in Favor of a Particular Outcome
Read the full article here