Charlie Munger is widely known for his Investment brilliance, however I believe his psychological knowledge base is far superior yet less widely known.
His 25 cognative biases list many factors which affect all of our lives on a daily basis, to which we should aim to remove in order to improve our decision making.
1. Reward/Punishment Bias
- The power of incentives and disincentives on the actions of others.
2. Liking Bias
- We ignore the faults of other people, products or companies that we admire.
3. Disliking Bias
- We ignore the vitues of those things we dislike and distort the facts to facilitate that hatered.
4. Doubt/Avoidance Bias
- When we are unsure about a decision we try to remeove any doubt by making a ill-informed, quick decision.
5. Inconsistentancy Bias
- We have a reluctance to change and eliminate our bad habits
6. Curiosity Bias
We dont have enough curiosity to learn, eventhough we receive so many benefits from a continuous learning process.
7. Fairness Bias
- Life is not fair and many cannot accepct this. Tolerating a little unfairness is ok.
8. Jealously Bias
- We have a tendency to envy those whom have what we desire.
9. Reciprocation Bias
- We tend to want to return the favour when someone helps us.
- This is good, however can sometimes lead to negative decision making.
10. Association Bias
- We are easily manipulated by mere-associations
11. Psychological denial Bias
- We have a habit of distorting the facts until they become bearable for our own views.
12. Self-regard Bias
- We all think we are above average.
- This is where over-confidence comes from.
13. Over Optimism Bias
- We tend to be over optimistic in most situations.
14. Deprived-Supercreation Bias
- Loss aversion.
- This refers to people’s tendency to strongly prefer avoiding losses to acquiring gains.
15. Social-Proof Bias
- Tendency to think and act as others around us think and act.
16. Misreaction Bias
- Misunderstanding of comparisons and missing out on the magnitude of decisions.
- It is better to evaluate people and objects by themselves then their contrasts.
17. Stress Bias
- Adrenaline tends to produce faster and more extreme reactions. Some stress can improve performance but heavy stress can cause dysfunction.
18. Mis-weighing Bias
- We overweight what’s easily available and prioritise the wrong things.
19. Use it or Lose it Bias
- We dont maintain the skills we learn ir understand there use.
20. Mis-influence Bias
- Very strong tendency that costs lives.
- It can only be supplemented by psychological denial.
21. Senescence Bias
- As we age there is a natural loss of certain skills and abilities.
- Continous thinking and learning helps to slow the decay.
22. Authority Bias
- Following orders just because someone says so.
- For example, Auctions, educational teachers.
23. Twaddle Bias
- Spending too much time on nonsense basically.
24. Reason Respecting Bias
- Most people just want the answers, not the reasons or a better understanding of them.
25. Lollapalooza Effect
- Charlie Munger is more famously known to discuss this bias on human beings.
- Essential, this occurs when multiple Biases are being inflicted on people at once.
* All information provided was solely taken from Charlie Munger himself and none of the ideas are attributable to myself.
I hope you enjoyed this read and recognised some very key facts about ourselves !
Jordonlee W. Smith 🙂