Munger's 25 Cognitive Tendencies (The Psychology of Human Misjudgment)

The Psychology of Human Misjudgment

This outline summarizes selections from three of Charlie Munger’s talks, combined into a talk he never delivered in that form and revised in 2005. The source lists these occasions:

(1) The Bray Lecture at the Caltech Faculty Club, February 2, 1992; (2) a talk sponsored by the Cambridge Center for Behavioral Studies at the Harvard Faculty Club, October 6, 1994; (3) a talk sponsored by the Cambridge Center for Behavioral Studies at the Boston Harbor Hotel, April 24, 1995.

Munger made his extensive revision in 2005 from memory, without additional research, believing he could improve on the earlier talks at age eighty-one.

In his preface, he describes the possibility of creating a more logical but longer "talk," incorporating his earlier material. He also recalls an education in which psychology outside patient treatment received little attention from the mainstream elite. Those experiences help explain his interest in collecting practical accounts of thinking errors. The supplied excerpt is an outline, not the complete preface or transcript.

One: Reward and Punishment Super Response Tendency

Munger puts incentives first because people often underestimate how strongly rewards and punishments shape behavior and judgment. His examples range from Federal Express and Xerox to Mark Twain’s cat, Ben Franklin’s maxim, Soviet communism, and B. F. Skinner. He also discusses incentive-caused bias in a surgeon’s gallbladder decisions, Defense Department procurement, cash registers, Westinghouse accounting, Enron, and agency costs. The practical question is what the system rewards, including behavior its designers did not intend.

Two: Liking/Loving Tendency

Munger compares a newly hatched goose’s attachment with human tendencies to "love" and to be "born to like and love" under certain conditions. His point is that affection can lead us to overlook faults, favor associated people or products, and distort facts. Admiration can reinforce the attachment; Fred Buffett is one of his examples.

Three: Disliking/Hating Tendency

The corresponding claim that people are "born to dislike and hate" introduces the opposite distortion: ignoring virtues and rejecting people or things through association. Munger’s examples include the World Trade Center attack, sibling rivalry, and political advertising.

Four: Doubt-Avoidance Tendency

Pressure and puzzlement can encourage a quick decision that relieves uncertainty. Munger discusses this tendency through religious faith and the deliberate delays used in courts. Reaching a conclusion can feel better before it is well supported.

Five: Inconsistency-Avoidance Tendency

People resist changing habits and earlier conclusions. Munger connects this with confirmation bias, Keynes’s remarks about new ideas, Darwin’s search for disconfirming evidence, initiation ceremonies, Chinese brainwashing, Franklin’s favor technique, and guards’ treatment of prisoners. His description of conserving mental programming space is an explanatory metaphor.

Six: Curiosity Tendency

Munger values curiosity as a force for learning. His contrast between Athens and Rome illustrates the importance he assigns to an environment that encourages inquiry.

Seven: Kantian Fairness Tendency

Munger uses Kant’s categorical imperative as a reference point for fairness and cooperation. His examples include courtesy on a one-way bridge, freeway lane changes, queues, sharing gains and losses, and the abolition of slavery. These illustrate his argument; they do not establish that one philosophical rule caused those practices.

Eight: Envy/Jealousy Tendency

Munger connects envy and jealousy with competition over scarce resources. He draws examples from siblings, myth and religion, university salaries, law firms, and Buffett’s observations about envy.

Nine: Reciprocation Tendency

People often respond to favors with favors and hostility with hostility. Munger discusses wars, Genghis Khan and ants, road rage, Tom Murphy, trench warfare, trade, marriage, Cialdini’s zoo experiment, Watergate, religious sacrifices, and guilt. Reciprocity can support cooperation or escalate a conflict.

Ten: Influence-from-Mere-Association Tendency

An association can shape a reaction without supplying a good reason for it. Munger’s examples include high prices suggesting quality, advertising, military music, Napoleon and Hitler’s past successes, affection influencing testimony, Persian Messenger Syndrome, CBS, Glotz, stereotypes, and the endowment effect.

Eleven: Simple, Pain-Avoiding Psychological Denial

Painful facts can be difficult to accept. Munger discusses bereavement, dying patients, chemical dependency, and Alcoholics Anonymous as examples of denial and attempts to confront it.

Twelve: Excessive Self-Regard Tendency

People can overrate themselves, their possessions, and their choices. Examples include Swedish drivers, the endowment effect, self-selected lottery numbers, sports betting, hiring impressions, Hewlett-Packard and Fiorina, the Tolstoy effect, excuses, and pride.

Thirteen: Overoptimism Tendency

Munger discusses optimism that exceeds the evidence, referring to Demosthenes, lotteries, and a grocery-store example. He recommends probability calculations as one way to test an attractive expectation.

Fourteen: Deprival-Super Reaction Tendency

Munger argues that losing $10 can provoke a stronger response than gaining the same amount, and that threatened losses can also produce strong reactions. His examples include his dog, bureaucratic infighting, ideology, zoning disputes, labor relations, gambling, open-outcry auctions, Belridge Oil, and Berkshire shareholders.

Fifteen: Social-Proof Tendency

People take cues from what others do, especially under uncertainty or stress. Munger draws on an elevator experiment, teenagers, oil-company fashions, cults, Serpico Syndrome, the Kitty Genovese story, boards of directors, and advertising. The usefulness of others’ behavior as evidence depends on the situation.

Sixteen: Contrast-Misreaction Tendency

Comparisons can distort judgments of absolute value. Examples include a leather dashboard sold alongside an expensive car, comparisons between spouses, real-estate sales tactics, and artificial price reductions. Munger also invokes the slowly heated frog as a metaphor and Franklin’s warning about a small leak; the frog story should not be treated as a demonstrated biological law.

Seventeen: Stress-Influence Tendency

Stress can change performance and judgment. Munger contrasts manageable pressure with severe stress and discusses depression, Pavlov’s work with dogs, and cult deprogramming. The effect depends on the task, person, and degree of stress.

Eighteen: Availability-Mis Weighing Tendency

Vivid or easily recalled information can receive too much weight. Munger recommends checklists, a deliberate search for disconfirmation, contrarian colleagues, and memory aids. Vivid images can either assist recall or distort the relative importance of evidence.

Nineteen: Use-It-or-Lose-It Tendency

Skills can deteriorate without practice. Munger discusses maintaining fluency, flight simulators, and Paderewski’s observations about practice.

Twenty: Drug-Misinfluence Tendency

Munger flags the capacity of drugs to impair cognition. The supplied outline does not develop this section further.

Twenty-One: Senescence-Misinfluence Tendency

Munger discusses cognitive decline with age and the value of continued learning. The tendency is a reason to examine actual ability and performance, not to assume identical changes in everyone.

Twenty-Two: Authority-Misinfluence Tendency

Following a leader can override independent judgment. Examples include physician ear drops, a wartime pilot, Milgram’s experiment, a Costa Rica fishing guide, and a CEO’s treatment of depreciation reserves.

Twenty-Three: Twaddle Tendency

Munger warns that confident, unproductive talk can obstruct serious work. He invokes a honeybee experiment and recommends limiting the influence of habitual prattlers.

Twenty-Four: Reason-Respecting Tendency

People respond to reasons, including sometimes reasons that provide little real justification. Munger discusses Carl Braun’s practice of explaining orders. Asking whether the reason is good matters as much as noticing that one has been offered.

Twenty-Five: Lollapalooza Tendency

Several tendencies can reinforce one another and produce an extreme result. Munger’s examples include Milgram’s experiment, sudden commitment in cults, and a McDonnell Douglas evacuation test. The checklist is intended to help notice these combinations, not merely identify isolated labels.

Questions and answers: topics in the outline

1. Overlap between tendencies: Munger acknowledges it but regards the framework as practically useful.
2. A combined example: the McDonnell Douglas test illustrates several tendencies operating together.
3. Practical responses: examples include Braun’s practices, simulators, Alcoholics Anonymous, medical training, the Constitutional Convention, Granny’s Rule, decision trees, Johnson & Johnson’s reviews, Darwin’s method, and Buffett’s rule.
4. A paradox: learning about a tendency can change behavior, but awareness does not make manipulation impossible.
5. Psychology and economics: the outline mentions a Camerer experiment and resistance to challenges to the efficient market hypothesis.
6. Ethical concerns: psychological knowledge can help people or be used to manipulate them.
7. Errors: Munger acknowledges that the account can contain mistakes.

Talk Eleven revisited

The closing update discusses Judith Rich Harris, The Nurture Assumption, and No Two Alike, along with Harvard’s later recognition of her work. Munger praises her willingness to question accepted explanations.