Out of all the books I’ve read and people I’ve tried to learn from, Charlie Munger by far has been the wisest from the ~250 sample size. Luckily, we have Poor Charlie’s Almanack written by Peter Kaufman, with approval and permission from Charlie of course. With a play on the book Poor Richard’s Almanack by Benjamin Franklin, Charlie’s favorite book hero, this book, which in actual life is a massive and heavy book. Built that way intentionally, it would be too heavy for a bookshelf and would sit on a coffee table, presumably for convenience of access and thus ability to casually read. A massive book at 548 pages, I’ve written down every single nugget of wisdom that I could find, leaving nothing out. Well, I guess that would be my list so you’ll have to trust it. I’ve decided to add everything rather than do a summary, because those tend to leave too much. I can say wholeheartedly that I wish I read this book way earlier than I did, for I would have not made the same kind of mistakes that I had made. Without ado, here is the summary notes I came up with from every chapter.
-“where there’s marriage without love, there will be love without marriage”
Charlie’s midwestern values: Continuous Learning Throughout Life, Curiosity for Knowledge, Rational Thinking, Steer Clear of Jealousy and Bitterness, Dependability, Drawing Lessons from Others’ Errors, Persistence, Impartiality, Openness to Challenge Personal Convictions, work ethic. Doesn’t say it directly however, and rather uses humour, inversions and paradox
-values life decisions over investment decisions. Doesn’t use fancy finance models.
-wanted wealth to reach independence, not for luxury
-simple messages repeated are the heart of instruction
-worked when he was young, long shifts no break
-taught morals, socialism as evil when young
-parents encouraged and gave nonfiction books as gifts when young
-no bachelor degree from world war 2 meteorology training, but connections to law school
-so first developed work ethic and curiosity for knowledge, and occasional parental assistance (or family friends)
-extreme intelligence, 1 of 12 with manga cum laude from law out of 335
-married at 21, divorced at 29. 3 kids, one died after. Lost everything in the court. Remarried from friend recommendation to another divorcee.
-do not feel self-pity
-marriage is way more important than wealth
-good two-way conversation between Charlie and Warren. Two ways, and one where people forget the time.
-“you don’t need to take the last dollar”
-“choose business clients as you would friends”
-found difficulty to run investment fund, wheeler, Munger partnership due to clients making random moves, same as Buffett. They resolved to create their own holding company, selling the partnership in Berkshire for shares.
-he preferred extreme concentration, and thus greater peaks and valleys
-an ideal partner is capable of all three roles: a follower, a leader, and independent (collaborative). It requires having confidence, lack of ego, and self-comfort to do all three.
-There are some people that it is ok to be a subordinate partner to
-Every people considered truly great has also embodied genuine virtue; Benjamin Franklin
-Charlie also respected Cicero; Roman writer before being murdered. His views; did not like mob rule, realistic cynicism about human nature. Humans tend toward immorality unless there is something that keeps them intact from that.
-A person seldom fully knows his own objectives or motives
-Cicero; reject conventional knowledge or points of view
-“as you pat yourself on the back for behaving well, you will improve your future conduct”
-Luke 18:9–14 KJV
The Pharisee and the publican
-Anyone who elevates themselves will eventually be brought down, whereas those who humble themselves will ultimately rise
-Cicero: constant improvement, factors the advantages of old age, believes in sacrificing early life if you live right. People when old live badly as when young they abused their youth
-poverty makes aging difficult
-patience is the greatest virtue
-the best way to prevent old age is to live well preceding it
-Cicero spoke too loudly and was executed by Mark Antony, someone not on friendly terms
-be a builder to create something for the future to leave behind
-Benjamin Franklin: The unfortunate aspect of life is that we age prematurely and attain wisdom belatedly. When you’re finished changing, you’re finished”
-the world rewards morality tempered with wit
-a cheerful adjustment from a reduced worldly role is sensible for the old
-when you borrow a man’s car, you return it with the gas tank full
-dinner table: morality tales (doing the right thing) vs downward spiral table (the wrong thing). Don’t cover up or hide mistakes.
1-do the job right the first time
2-be responsible
-Charlie was always thinking, mind in deep contemplation, taught kids to be contrarian, humble
-funny, convivial (friendly), spoke naturally to children, few words, sometimes direct and sometimes not
Chapter 2 — Munger approach to life, learning, decision making
-like Ben Franklin, had an insatiable curiosity, patient demeanour, work ethic, self-teaches things and learns quickly due to an open mind.
-Charlie possesses the ability to swiftly and precisely analyze and assess any type of deal, surpassing the proficiency of any living individual. He can see any valid weakness within 60 seconds. He is a perfect partner” Warren Buffett
-“When we attempt to isolate something on its own, we discover its interconnectedness with every other element in the universe” John Muir
-Winning systems maximize or minimize in just a few different ways, like the discount warehouses of Costco
-use a multi model approach; know all the big disciplines big ideas, else suffer narrow-mindedness. “To the man with a hammer, the world looks like a nail”
-“Simplicity emerges as the final outcome of extended and arduous effort, rather than being the initial foundation” Frederick Maitland
-life is related and connected
-it is more important to change your mind than it is to prove there is no need to do so (to argue)
-“any year that you don’t destroy old ideas is a wasted year”
-Lollapalooza effect; everything is interrelated. In an investment decision, you will find multiple positive or negative signals that are related to each other, for example the models and factors that I have seen in good investments. If face some conflict, you will need to weigh trade-offs
-there is extreme predictable irrationality in the world. “I’ll do it myself” Little Red Hen
-there is no better teacher than history in determining the future
-using all the big disciplines big ideas, particularly psychology, is the foundation of investing
-doesn’t buy or sell often, early days held 3 stocks at once
-being a correct contrarian, lone wolf is key to investing
-big opportunities in life are rare, so they must be seized when discovered, and with your full might and weight, not a little
-remove stupid mistakes over smart decisions as it’s easier
-many of our subconscious decisions or conclusions can often be wrong
-buy misprized gambles
-if you have competence, you already know it’s boundaries
-non-numerical factors can also count as intrinsic value, that cannot be calculated
-understand big ideas to find hidden gems easier instead of wasting time searching, accounting and its tricks, intrinsic value, moat, management. Companies rarely last more than one generation.
-If you’re really good at investing, it becomes philosophical over mathematical
-perspective is needed to succeed; both from people and books
-passionate interest on why things are the way they are is needed to succeed, a focus on reality. One cannot be narrow minded and be in one field, should spread out occasionally and yet also master one field.
-commits more time to learning and thinking than to doing
-doesn’t take “initial positions” or “small, speculative investments”. These imply uncertainty or ignorance.
-calm, patience, self-discipline, independence
-Darwin’s blind spot; survival of the friendliest works too (out-cooperating)
-the selfish gene; outcompeting others
-the best measure of value is buying discounted off intrinsic value
-you have to derive it yourself to remember it better
Charlie’s tiles for investment analysis
1- risk, especially reputations
-margin of safety
-avoid people of questionable character
-proper compensation for risk
-beware inflation, interest rate
-avoid big mistakes of capital loss
2-independence
-independence of thought; objectivity, rational
-mimicking the herd leads to regression to the mean
3-preparation
-lifelong learning
4-intellectual humility
-I don’t know begets wisdom
-I am the easiest person to fool
-resist false certainties
5-analytic rigour
-activity doesn’t necessarily equal progress
-remember the obvious, big details over esoteric, less important ones
-focus on the business, not the market or macroeconomics
-think forward and backwards
-forward thinking, future level impacts
6-allocation
-concentration, but ready to sell at any time
7-patience
-goes against human nature to act
-enjoy the process as that is where we live in all of life
8-decisiveness
-act heavy with conviction when time is right and opportunity presents itself
9-change
-change quickly to reality
10-focus
-reputation and integrity are most value, takes 10 years to build and 10 minutes to ruin
-guard against hubris, boredom
-don’t drown in minutiae, overlooking the obvious
Learn vicariously from mistakes. Preparation, discipline, patience, decisiveness.
-honesty is the best policy
-Skill propels you to the pinnacle, but integrity ensures your enduring presence
-Louis Vincenti; tell the truth, and you won’t have to remember your lies
-if you have a rate of return of 12% and a cost of capital of 3%, you are going to do well in life
-Berkshire is now too big to buy small companies
-hands off management approach
-wisdom helps avoiding dealing with questionable people; Berkshire has rarely fired anyone
-being able to be conservative in insurance writing is not easy, yet Berkshire does it
-Charlie, the abominable “no-man”. Reason being is, it’s difficult to find something that is really good. So, if you say ‘no’ 90% of the time, you’re not missing much
-“a thing not worth doing is not worth doing well”
-Qualities needed for investing: temperament, patience, and curiosity
-academic theories of investing are useless
-constructive criticism should be paid attention to
-there greatest mistakes are mistakes of omission, and a second, not buying big enough when the odds were in their favour
-Short selling is not worth it
-becoming a great investor occurs very slowly over time
-is you’re going to be a successful investor; you’re going to need to make investments where you don’t have all the experience you need
-listening to people who claim they can predict the future is crazy
-if indexes go up by 15% per year, typically after low return period. Japan P/E was 50–60 at the time, then fell to eternal depression
-by exposing himself to a massive amount of micro level data, Charlie knows what’s happening at the macro level
-human nature is to manipulate accounting numbers as there is so much at stake riding on those numbers
-mutual and hedge funds add no value and steal high commissions
-indexing can’t work well forever if almost everybody turns to it
-mutual fund managers can take bribes to betray their own shareholders
-the culture now and at Wall Street is if anything can be sold it will, regardless of ethics. Animal-spirited
-the ethics of the top accounting firms have been eroding quickly; aggressive accounting and creative accounting. Accountants fall of morality: “whose bread I eat, his song I sing”
-Options are a compensation expense and dilution. They are bad incentives, and black Scholes pricing model is worthless
-against financial institutions that have a big book of derivatives
-only 25% of sued money goes to the winner, rest to lawyers
-once wrongdoers get rich, they get enormous political power and you can’t stop it; best to stop things before they happen
-learn the big mental models early in life; actually learn them to be ingrained, not to learn them in an exam and then forget them after leaving. And actually recognize what is right and retain that, and discard what is wrong. Thus, reading a lot is not enough.
-thinks liberal arts suck, 3/4 degrees are useless
-life is more about than being shrewd in wealth accumulation; only getting rich is a failed life
-success in life comes mainly from avoiding bad endings, or the 6 D’s.
-avoid evil, particularly attractive members of the opposite sex, be satisfied with what you have, avoid envy, improve little by little every day, contentment
-find a good spouse by being a good spouse to deserve a good spouse
-reduce material needs
-the Chinese by culture are gamblers, opposite of Japanese, which works very badly in the stock market
-people who are attracted to be in a position of power like being police are not nature’s noblemen to begin with
-a lot of the smart investors avoided the tech bubble entirely
-most people say what you should do in life, Munger starts with what you shouldn’t do
-if you keep chipping away one day at a time, and if you live long enough, most people get what they deserve
-avoid: investing chemicals to alter mood or perception, envy, resentment
-Benjamin Disraeli would write down names and reviewed them from time to time taking pleasure when the world punished his enemies, as an outlet for resentment
-be reliable, learn vicariously, especially from others mistakes (and successes)
-you have to eat the carrots before eating the cake
-don’t memorize, understand, remember, derive learning points from vicarious and direct experiences so that a multi model is used for future decisions
-need perspective and open-mindedness
Mental models to have:
-thinking in terms of decision trees, permutations and combinations
-accounting (has limitations)
-like Simon Sinek, if you tell people your why, they are more likely to get on board
-psychological knowledge can be used to control and motivate other people. Human psychology is important to gain worldly wisdom and avoid pitfalls
-specializing increases economic opportunity, same with economies of scale
-absence of change is the friend of investors, change is the friend of society
-social proof; band wagoning advantage (think Apple open concept stores taking this advantage)
-Jack Welch, founder of GE; we are going to be either number one or two or we are out. In the long run, you can only hold companies for the long haul that are #1 or #2 in the industry. The others are too risky.
-when you get big, you get bureaucracy, which is human nature, slowing things down
-Get a CEO or company when it’s young and you get a long runway
-government is the worst bureaucracy
-Sam Walton: you can learn from everybody. Walmart just did advantage of scale.
-Airlines are terrible investments — everyone in the industry makes no money, due to no brand. However, some industries everyone makes money, like cereal. A industry where no one makes money is not an industry to invest in. Will be interesting to see if ride sharing makes money.
-develop a narrow circle of competence, in fields where work ethic leads to results. Sports does not. Figure out what your aptitude’s are and stay there.
-in a pari-mutuel system, those who seldom bet and bet big win. Work hard to gain a few insights.
-the winner has to bet very selectively
-investment managers goal is to sell, not win
-incentives drive human behaviour; thus, get the incentives right. E.g. pay people by project, not hour
-Munger has not met anyone investing succeeding in doing sector rotation, too much buying and selling
-Munger figures out buying wonderful businesses at fair prices is better than fair businesses at wonderful prices
-those who adapt the quickest win; not the most intelligent, or responsive to change
-find a good business (1st) with a good manager (2nd) early on in its lifespan and bet big, even if the price is not a bargain. E.g. when Walmart first went to IPO, that is a business to bet big and hold. Modern day examples include Facebook, amazon, shopify, Tesla. “Get the good ones while they are young”
-Collectively, the investment management industry doesn’t provide any net value added to the entirety of its clients. To non-company founders, stocks is a zero sum game.
-Yale and Harvard hired unconventionally investment managers and did well, even going into venture capital. Venture capitalists present to the best funds so everyone has highest chance of success.
-Academic knowledge works well in worldly wisdom, but not necessarily the real world
-you don’t have to be brilliant, only a little wiser than others for a long time
-Coping with life: have low expectations, have a sense of humour, surround yourself with love of friends and family. Live with and adapt to change
-School doesn’t teach you to be multi-disciplinary model or big business, therefore, like the little red hen, I’ll do it myself
-if you get a lot of extreme heavy ideology when young, and start expressing it, you are more likely to become close minded (e.g. cults)
-Warrens dad was heavily right wing, which Warren believed was bad and chose not to follow
-what a man wishes, he also believes
-having extreme certainty, especially young, turns you into a lousy thinker
-basic denial, envy are not well covered in psychology
-use a confirmed checklist in life of multiple discipline areas and don’t forget it; stick to those principles, similar to investing
-a majority of people will do something immoral if: it’s easy to do, unlikely to get caught, no punishment. Avoid starting a business where it’s easy for others to steal from you; also don’t give that impression either, that it’s easy to steal or take advantage of
-do not cross moral limits
-stop madness as soon as it hits
-be good at changing your mind
-do not try to succeed in things you aren’t good at
-Munger likes Disney, social gambling with people he knows for fun but not at casinos
-know what you know, know what you don’t know
-it is okay to say I don’t know rather than be overconfident and fake an answer
-only be around terrible people to the extent necessary; leave whenever possible. But do not run your own life in that same manner.
-do not parent kids by telling them exactly, but helping them reach the goal/lesson
-you can’t be with people who you have to go to extreme measures to get them to behave well
-society now is in a trigger happy sue everyone state. Avoid situations, people or jobs that draw other people’s ire to sue you. Don’t be the messenger of bad news. Act accordingly with unfair laws against you.
-bashes professors
-teach, but enforce with reasoning and not directly for best results, self-discovery
-need a multi dimensional way of thinking
-you have to live the life you want to live
-replicate and follow the wise
-you ought to do something to make money. Many activities are dignified by the fact that you earn money
-avoid intense interest or animosity to politics
-create systems that prevent or discourage immorality
Talk Four: practical thoughts about practical thought
-simply problems by starting with the obvious, numerical fluency in investing is key, solve problems by thinking forward, but also working backwards from the solution
-think in a multi disciplinary fashion, that does not rely solely on other people’s opinions
-A rival product, when left untested, cannot function as a stimulus to develop an opposing habit. This is a familiar understanding for any married individual
-the brain of men yearns for the type of beverage held by the pretty women he can’t have (same with cars; as Scott Galloway says, emotional, psychological, sexual appeals work much better with advertising and branding). Use Pavlov’s conditioning in a positive fashion. First mover advantage is huge, 2nd and 3rd movers usually have a difficult time. When they copy, you can bring in the next technological and other advancements to always be one step ahead.
-social proof: imitation, monkey see, monkey do
-coca-cola has not changed flavours for so long as people are used to it and still like the same flavour
-it is so crucial to be multi disciplined; it prevents a man with the hammer proverb as they carry multiple abilities. Incentives cause behavior and bias (short seller articles or misinformation or negative information)
-use it or lose it (if financial skill and knowledge acquired)
-allocate training time amidst subjects; balance
-use a checklist for evaluating companies
-think forwards and backwards
-take what you wish is not a good saying as people abuse it
-accounting mastery and psychology are required in today’s world (make money and know people)
-take a simple, basic idea and take it very seriously
-instead of looking for new books, re-read good old books
-everyone is too one minded, close minded
-incentives drive behavior; therefore, it is hard to assimilate or change someone’s minds if there is a conflict of interest
-the accountant takes the easy things that comes before him, while failing to reach out for the things that count
-extra thinking is often just overthinking. The first principle is to not fool yourself, and it’s easiest to fool ourselves
-extreme concentration
-too many people chasing money with slimy activities in money management
-has never tried to make money from foreseeing macroeconomic changes
-the top 1% have 50% share of stocks, and the bottom 80% have 4% share of stocks
-when one is foolish in one difficult and important area of life, they usually are at other related matters as well
-“the man who needs a new machine and hasn’t bought it is already paying for it”
-if you don’t have the right way of thinking, you and the people around you are already suffering from ignorance
-once you lose reputation, it’s as good as over, and difficult to be rekindled, if you are in the business of keeping reputation. Your own reputation of you is more important than others reputation than you
-insecure and powerless people; whose bread I eat, his song I sing
-in an organization, it’s safer to be wrong with the majority than to be right alone
-people are searching for moral justifications for selfishness
-appeal to interest, not reason
-have a lot of checklists to follow in your mind
-weaknesses with economics; too narrow, doesn’t consider hard science, doesn’t consider reality, too narrow, too macro
-we hire business school graduates, and they’re no better at these problems than you were. Maybe that’s the reason we hire so few of them
-extreme success is likely caused by some combination of below:
1- extreme maximization or minimization of one or two variables (concentration of avoidance)
2- adding many success factors (lollapalooza effect), multi-dimensional
3- extreme good performance in multiple factors (not likely for me)
4- catching and riding big waves
-high prices can increase demand, contrary to economics if: presumed as a luxury good (Apple), or viewed as quality
-economics has psychological ignorance, does not consider further longer-term consequences, and unintended consequences
-don’t keep throwing good money at dead money; avoid dead-end situations and get out as soon as you can. Avoid the jerks, bring as many people with you. Doesn’t care for future predictions at all. Actually, invest in your children in various ways.
-do not design games where they are easy to game
-Ricardo’s comparative advantage does not consider 2nd and 3rd consequences; for instance that the developing nation takes over everything via trade
-when the markets go up, nobody pays attention to anything
-the cash register did more for human morality than the church; the church preys on guilt
-envy is the worst sin, as indicated in the Ten Commandments
-do not get a wrong idea from limited experience then be stubborn about it
-self interested vice is the real engine of progress, not altruism
-get really good at destroying old long held beliefs
-trust is the most important factor; reliance upon character, values and integrity of those you live and work with
-ethical practises aren’t good because they pay, they pay because they are good
-“no matter how smart you are, there are smart people out there who can fool you if they want to. So be sure you can trust the smart people you work with”
-Confucius: love and respect one’s parents and ancestors: filial Piety
-deliver to the world what you would buy on the other end
-lifetime learning is important, in order to advance in life after university
-idolatry love is too much; obsessive love, a sick kind of love
-Gaining wisdom is a responsibility guided by ethics
-progression occurs from continuous learning
-it is dangerous to be right in matters where established men are wrong and where they would lose face
-when you show you know a lot and show others are wrong it bothers them. Keep insights hidden, avoid offending people
-those peoples who failed to learn from history are doomed to repeat it
-avoid laziness and unreliability
-be careful with intense ideology; they can permanently cloud your mind, such as extreme religion or politics. Overly intense ideologies prevent one from becoming wise. Shouting stuff out only pounds its in. It becomes even more a problem with companions that are all true believers
-it’s not necessary to hope to persevere, but most people do
-Mozart overspent his income and was a gambler
-a lot of these intelligent types succeed in one area of life, but then fail miserably at other areas of life. Mozart, Newton, and many others that I’ve forgotten about
-envy, resentment, revenge, and self-pity are to be avoided
-self-pity is a very natural standard response
-avoid self-serving bias; also allow for self-serving bias in the conduct of others, otherwise you are a fool. Most people are not going to be very successful at removing such bias
-appeal to interest, not reason
-avoid perverse incentives, where doing the wrong thing gets rewarded as this leads to the wrong thing more and more
-avoid perverse associations, being around people you don’t like or admire or want to be like
-maximize life by maximizing the experience of successful people you’d want to become. Learn from heroes you’d want to look like
-Politicians have chauffeur knowledge; enough to fake it, but not enough to know it. Distinguish between the two. Chauffeurs like to make a big impression
-genuine interest leads to success
-maximize a seamless web of deserved trust
-A marriage contract should not have too many pages to it
-the problem with life is we get old too soon and wise too late
-people are easily fooled and manipulated based on stimuli to be altered positively or negatively
-25 psychological biases or tendencies
-we are conditioned creatures, seeking repetition of childhood past, whether right or wrong
-1. reward and punishment tendency; people will do things that give positive reward variably, and avoid negative punishments. Appeal to interest, not reason
-due to incentive bias, one should avoid or take with a grain of salt the advice of professional advisors
-repeat what works, especially moral behavior
-humans tend to game all human systems at the expense others for themselves. Therefore, prevent gaming, or at least, look for people who do not believe in gaming the system.
-Currently, money serves as the primary incentive that motivates behaviors. Other rewards; sex, friendship, status, etc
-2.liking/loving tendency; babies born will like the first person that loves them (the mom). That’s why, it has to be the mom. Leads to blind bias, false positive association of people we know. Also causes positive boosts towards each other in virtuous cycles
-3. Disliking/hate tendency. To see all bad, and only bad, in the other person
-4.doubt-avoidance tendency; remove doubt to reach a decision quickly, leads to overconfidence. Results from uncertainty and stress
-in order to succeed at investing in the stock market, the ones most able to resist human nature will win
-5. Inconsistency avoidance; people are creatures of habit, both good and bad, and get stuck in their ways. The bonds of habit are so subtle that their weight is imperceptible until they become too burdensome to break. Those who can acquire good habits and remove bad habits are very wise. It’s far easier to prevent a habit than it is to change it.
-avoid first bias conclusion
-that’s why old people cannot change, as they are ingrained with their ways of thinking. Thus old companies die out unless the person running the company is wise (rarely). When one is maneuvered into treating another well, they will tend to like them. Same in reverse. So, when one pretends something and acts it, they eventually are it. It is important not to put one’s brain in chains before one has come near potential of rationality
-the curious are provided with fun and wisdom after formal education has ended (curiosity is thus linked with being open-minded)
-fairness tendency, to display and expect it
-one of the least covered emotions and yet highest drivers are envy and jealousy
-without reciprocation tendency, marriage would lose much of its allure, the lack of daily interchange
-mislead people by inducing reciprocation tendency (avoid being tricked); additionally, use it to find out who has common sense. It has caused many extreme and dangerous consequences. A guy can get tricked into doing bad things when someone has already made a concession to them on another front (guilt)
-a good relationship is where one tries to please the other more than being pleased
-Munger likes that religion uses guilt to induce hard to follow ethical and devotional standards
-influence from association tendency; people of associated with positive things get viewed positively (always bandwagon with winners), people associated with negatives (funeral) get negatively viewed
-instead of eyes half shut after marriage, see it like it is and love anyway
-Persian messenger syndrome; don’t be a messenger of bad news. To combat it myself, welcome bad news immediately first and take it on a daily basis. Don’t kill the messengers. Back to favour and envy, the one who gives a favour in the better position to someone in a clearly worse position in life, the one in the worse position will actually feel envious and injure the one in the higher position from envy and being treated so lowly. That’s why people hang around people with similar status and ability as them, plainly evident in many ways (income, religion, marital status)
-simple, pain avoiding psychological denial; people will make excuses to avoid the truth as it is too difficult to bear. They may tell themselves and others outright lies, or a common excuse “this is what God wanted for me”, “I did everything I could do”, “I was screwed to begin with”. This leads to an unrealistic view or even altered view of reality such that one goes deeper and deeper into deterioration of life, and overconfidence.
-excessive self-regard tendency; people over value themselves, thereby causing them to only associate with themselves (a problem, as it leads to close mindedness and dysfunctional groups). Also leads to lottery picking. Over self-appraisal leads frequently to disaster. This leads to excuses and lack of responsibility for one’s own actions and circumstances, externalizers for blame and looking to assign blame. Cure by being self-objective, admitting you are a thief. Use a fair, meritocracy, else severance of the bad offenders. Having pride in being reliable and trustworthy is a good thing; pride typically isn’t but being reliable is, it leads to a life that is better in the long run averaged out.
-Deprival super reaction syndrome; people over react to potentially losing something, as if they lost it. Remedy; have no entitlement towards anything, low expectations. This leads to immense close mindedness, for example by religious groups or ethnic groups that are always together (a church, a religion) because they don’t want to lose that comfortable environment and false social support.
-Leads to gambling addiction to try to recover what’s lost, wage reduction causing uproar, close mindedness.
-Charlie Munger stock error: he bought some belridge stock, which went up 30x in 2 years, yet didn’t buy more as it required him to borrow or sell other stocks. Also know when to sell stocks by not being married to stocks. Tough to time, if difficult, do so in portions like I am right now
-social proof tendency; to copy others. Occurs when you are stressed or uncertain. Answer: develop independent competence. People will follow others actions but also inactions, which in life is actually worse
-learn how to ignore the examples and methods of others when they are wrong, and instead follow what is right
-Constrast-misreaction tendency; people will brush over small contrasts which may be damaging. For example, the small leaks are the ones that sink ships, not large leaks as everyone will notice and fix those. Additionally, large contrasts may make people to make a wrong decision, even though they think they are making the right decision. E.g. A good woman marrying a bad man as she compared a few options and believed she got the best one, even though there are many men out there. Another is salesmen showing a few massively overpriced homes first, then one that is overpriced, and ends up making the sale, as people are addicted to comparing things and picking the best and getting false satisfaction as a better choice may exist outside all of those. Takeaway: take your time when doing things, don’t make haste decisions, learn to think outside the forest and the box
-stress-influence tendency; people under extreme stress will do extreme things. Even after the stress is removed, such person is subject to change (hence PTSD). This works well when people are to be horrified away from bad habits or thoughts. Pavlov concludes that the hardest to break down dogs by stress were also the hardest to return to their pre-breakdown stress. They are stubborn both ways, as the stubbornness doesn’t change; they stubborn to change and stubborn to break. Any dog can be broken down, and the only way to reverse course is to impose new stress.
-availability-misweighing tendency; to assign greater weight to what we know or remember vs what we don’t know or remember. Assuming companies I’ve heard of are better than ones I haven’t. “When I’m not near the girl I love, I love the girl I’m near”
-use it or lose it tendency; people forget skills they don’t use. If they are fluent, it takes longer to forget and easier to get back. Use important skills and abilities, and since time is limited, only do what’s important
-when people get older, at some point, everyone starts to experience cognitive decay, some earlier and quicker than others.
22: authority-misinfluence tendency; to follow or please authority, even if authority figures are wrong or intentionally misleading you. E.g. Hitler. Be careful who you listen to.
-address the why in life, figure out the why in other people’s life
-don’t try to manipulate psychological tendencies with people whose trust you need as it doesn’t work long term, for example in marriage
-peer pressure is far more important than parental nurture when young
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.