David Brooks referrers in his latest column to “Charlie Munger of Berkshire Hathaway [who] once gave a speech called “The Psychology of Human Misjudgment.” He and others list our natural weaknesses: We have confirmation bias; we pick out evidence that supports our views. We are cognitive misers; we try to think as little as possible. We are herd thinkers and conform our perceptions to fit in with the group.” Brooks highlights the inability of this culture to face its own thinking and writes that “of the problems that afflict the country, this is the underlying one.”
One of the main David Brooks’ weakness is that he has a shallow historical range, never experienced himself in a different culture. His diagnosis is correct but he fails to mention that this is the eternal problem and that the recent cultural developments made this problem much worse. For example the confirmation bias is turbocharged by the internet where every person can search out a particular brand view, that fits him like a glove. It’s also exacerbated by the current TV culture where ideas turn into a team sport. There required confrontational format has a team you are for and a team you are against.
Anyway I couldn’t sleep last night so I was listening to Charlie Munger. There is an hour-long lecture he gave at the Harvard Law School in 1995 – “The Psychology Of Human Misjudgment”, available in the audio and the transcript. A man should hear this couple of times in a lifetime.
Charlie Munger’s Standard Causes of Human Misjudgment:
- Under-recognition of the power of what psychologists call ‘reinforcement’ and economists call ‘incentives.’
- Simple psychological denial.
- Incentive-cause bias, both in one’s own mind and that of ones trusted advisor, where it creates what economists call ‘agency costs.’
- Superpower in error-causing psychological tendency: bias from consistency and commitment tendency, including the tendency to avoid or promptly resolve cognitive dissonance. Includes the self-confirmation tendency of all conclusions, particularly expressed conclusions, and with a special persistence for conclusions that are hard-won.
- Pavlovian association, misconstruing past correlation as a reliable basis for decision-making.
- Reciprocation tendency, including the tendency of one on a roll to act as other persons expect.
- Lollapalooza, and Henry Kaufman wisely talked about this: bias from over-influence by social proof – that is, the conclusions of others, particularly under conditions of natural uncertainty and stress.
- Made these economists love the efficient market theory is the math was so elegant.
- Bias from contrast-caused distortions of sensation, perception and cognition.
- Bias from over-influence by authority.
- Bias from deprival super-reaction syndrome, including bias caused by present or threatened scarcity, including threatened removal of something almost possessed, but never possessed.
- Bias from envy/jealousy.
- Bias from chemical dependency.
- Bias from mis-gambling compulsion.
- Bias from liking distortion, including the tendency to especially like o neself, o ne’s own kind and o ne’s own idea structures, and the tendency to be especially susceptible to being misled by someone liked. Disliking distortion, bias from that, the reciprocal of liking distortion and the tendency not to learn appropriately from someone disliked.
- Bias from the non-mathematical nature of the human brain in its natural state as it deal with probabilities employing crude heuristics, and is often misled by mere contrast, a tendency to overweigh conveniently available information and other psychologically misrouted thinking tendencies o n this list.
- Bias from over-influence by extra-vivid evidence.
- Mental confusion caused by information not arrayed in the mind and theory structures, creating sound generalizations developed in response to the question “Why?” Also, mis-influence from information that apparently but not really answers the question “Why?” Also, failure to obtain deserved influence caused by not properly explaining why.
- Other normal limitations of sensation, memory, cognition and knowledge.
- Stress-induced mental changes, small and large, temporary and permanent.
- Common mental illnesses and declines, temporary and permanent, including the tendency to lose ability through disuse.
- Development and organizational confusion from say-something syndrome.