Here I'm collating few of the issues mentioned in Charlie Munger's talk on Psychology of Human Misjudgement . I have tried to present few of them for example and they are seriously from educational purposes . References for the text are Seeking Wisdom and Poor Charlie's Almanack
Status quo where we take one stand and stick to it , just like if we are presented with two choices of action and inaction and most of the time its driven by our social status , where we think what people are going to think if I do this or that . So we try to avoid the most obvious scenario by sticking to inaction . As Warren Buffet took the example of Noah's ark -
It took Noah 20 years to build an ark. And people said he was being silly because the skies were beautiful. And of course, the whole time, he looked stupid -until it started raining. You can spend a long time building an ark while everybody else is out there enjoying the sun.
It took Noah 20 years to build an ark. And people said he was being silly because the skies were beautiful. And of course, the whole time, he looked stupid -until it started raining. You can spend a long time building an ark while everybody else is out there enjoying the sun.
Thomas Henry Huxley said: "Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do when it ought to be done whether you like it or not. It is the first lesson that ought to be learned and however early a person's training begins, it is probably the last lesson a person learns thoroughly
Envy:-
Aristotle said: "Envy is pain at the good fortune of others." We evaluate our own situation by comparing what we have with what others have. Aristotle continues: "We envy those who are near us in time, place, age or reputation." It is people similar to us we envy most. Financial historian Charles P. Kindleberger says in Manias, Panics, and Crashes: "There is nothing so disturbing to one's well-being and judgment as to see a friend get rich." For example, studies show that how happy we are is partly determined by where we stand in relation to similar others. The 19th Century German philosopher Arthur Schopenhauer said: ''As Hobbes observes, all mental pleasure consists in being able to compare oneselfwith others to one's own advantage." We are jealous when we perceive a threat to a valued relationship. Studies show that jealousy is ranked among the top three motives for murder
Aristotle said: "Envy is pain at the good fortune of others." We evaluate our own situation by comparing what we have with what others have. Aristotle continues: "We envy those who are near us in time, place, age or reputation." It is people similar to us we envy most. Financial historian Charles P. Kindleberger says in Manias, Panics, and Crashes: "There is nothing so disturbing to one's well-being and judgment as to see a friend get rich." For example, studies show that how happy we are is partly determined by where we stand in relation to similar others. The 19th Century German philosopher Arthur Schopenhauer said: ''As Hobbes observes, all mental pleasure consists in being able to compare oneselfwith others to one's own advantage." We are jealous when we perceive a threat to a valued relationship. Studies show that jealousy is ranked among the top three motives for murder
Bertrand Russell said that envy is one of the fundamental causes of human suffering. The 18th Century French philosopher and mathematician Marquis de Condorcet said: "Enjoy your own life without comparing it with that of another." As long as you achieve your goals, it shouldn't matter if someone else does better. • Studies show that it matters whether we believe that others deserve their success. Aristotle said: "The best way to avoid envy is to deserve the success you get." • On the other hand, the 18th Century Dutch physician Bernard de Mandeville said that vices such as greed, envy, and vanity all lead to public benefits by encouraging enterprise.
Contrast Comparison:-
A hotel has been renting rooms for $100 a night. The day after a hurricane, the hotel raises its prices to $150. Studies show that we consider this unfair. We determine what is fair or not in reference to what we have been used to. This means that policies that have habit-forming consequences may be hard to reverse if they are seen as a loss.
A hotel has been renting rooms for $100 a night. The day after a hurricane, the hotel raises its prices to $150. Studies show that we consider this unfair. We determine what is fair or not in reference to what we have been used to. This means that policies that have habit-forming consequences may be hard to reverse if they are seen as a loss.
In one experiment, a group of people was asked to choose between $6 and an elegant pen. Most choose the cash. Another group of people was asked to choose between $6, the elegant pen, or an inferior pen. Most choose the elegant pen. By adding an inferior option, another option seemed more attractive. Mary is looking at houses. The real estate broker knows that the house he is trying to sell Mary is in poor shape and a bad area. He starts by showing Mary bad properties in an ugly neighborhood. Afterwards, he takes her to the house he wanted to sell all along. Suddenly this house and the area seem great in comparison to the other houses she saw.
Anchoring :-
In one experiment, a group of people was asked to choose between $6 and an elegant pen. Most choose the cash. Another group of people was asked to choose between $6, the elegant pen, or an inferior pen. Most choose the elegant pen. By adding an inferior option, another option seemed more attractive. Mary is looking at houses. The real estate broker knows that the house he is trying to sell Mary is in poor shape and a bad area. He starts by showing Mary bad properties in an ugly neighborhood. Afterwards, he takes her to the house he wanted to sell all along. Suddenly this house and the area seem great in comparison to the other houses she saw. Another example of contrast comparison is when we interview one job candidate after another.
A hotel has been renting rooms for $100 a night. The day after a hurricane, the hotel raises its prices to $150. Studies show that we consider this unfair. We determine what is fair or not in reference to what we have been used to. This means that policies that have habit-forming consequences may be hard to reverse if they are seen as a loss.
