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 🙂

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