Transcription
The elementary part of psychology - the psychology of misjudgment, as I call it - is a terribly important thing to learn. There are about [25] little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important. Terribly smart people make totally bonkers mistakes by failing to pay heed to it.
In our digital age we could think that we are just talking with machines, right? I'm just talking with my camera and not with you directly, face-to-face. So why should we even care about learning human behavior? Well, we should care because these digital tools, these machines show in many ways our human side. And our digital age isn't replacing human behavior, on the contrary, it makes it more visible and more intense. And when we look at it from this perspective we could even say that learning human behavior is more important than ever. And that's exactly why we are looking here at the psychological mental models based on Charlie Munger.
Before we start with some models here's how far we have built our latticework in the previous videos. If you're interested in watching them, all the links you find in the description below. The psychological models in this video are based on Charlie Munger's write-up "The Psychology of Human Misjudgement". I take all his 25 models, one to one, adding some extra examples mostly from Peter Bevelin's book "Seeking Wisdom" and visualize them to hopefully make them understandable and most importantly usable for you. I can highly recommend you to read the just mentioned "The Psychology of Human Misjudgement". There's extreme value in it.
"And then when you get into psychology, of course, it gets very much more complicated. But it is an ungodly important subject if you are going to have any worldly wisdom."
"Ben Franklin in Poor Richards Almanack: "If you would persuade, appeal to interest and not to reason." This maxim is a wise guide to a great and simple precaution in life: Never, ever, think about something else when you should be thinking about the power of incentives."
Incentives are a powerful tendency underlying a whole lot of human behavior. Consider the following example: "From all business, my favorite case on incentives is federal express. The heart and soul of the system - which creates the Integrity of the product - is having all the airplanes come to one place in the middle of the night and shift all the packages from plane to plane. If there are delays the whole operation can't deliver a product full of Integrity to Federal Express customers. And it was always screwed up, they could never get it done on time. They tried everything. Moral suasion, threats, you name it. And nothing worked. Finally somebody got the idea to pay all these people in not so much an hour but so much a shift. And when it's all done, they can all go home. Well, the problems cleared up overnight."
For another example consider this: Every day we have to deal with advisors whether it's for example financial advice, medical advice, or whatever nature. Why do we go to advisers in the first place? Because they have likely more expertise in one special area than we do. But what we have to be careful of is that they, in many cases, have their own incentives. Most people want us good but even those fall prey to the Reward- and Punishment superresponse tendency.
"Widespread incentive-caused bias requires that one should often distrust, or take with a grand of salt, the advice of one's professional adviser, even when he's an engineer. The general antidotes are here (1) especially fear professional advice when it is especially good for the advisor; (2) learn and use the basic elements of your advisor's trade as you deal with your advisor; and (3) double check, disbelief, or replace much of what you are told to the degree that seems appropriate after objective thought."
We can implement the tendency in a positive way into our lives, designing incentives so that they work for us and not against us. Charlie Munger talks about the Granny's rule. That is eat your carrots first. What that means is to do the hard things first than the easier ones. We are rewarding ourselves, so to speak, with the easier ones by doing first the hard ones or in terms of the Granny's rule: We eat first the vegetables, let's say the harder part and then we eat the let's say sweet part or the other food whatever we like more than vegetables. Incentives are everywhere around us. For example, in economics there is the Principle Agent Theory which is also basically an incentive problem. I made a whole video about the Principle Agent Theory feel free to check it out if you're interested in it.
"And what will a man naturally come to like and love apart from his parent, spouse, and child? Well, he will like and love being liked and loved."
This tendency works in two ways which are reinforcing each other. People who appreciate and give us flattery are those we like. A sort of reciprocal behavior. We tend to like people who like us.
"One very practical consequence of liking/loving tendency is that it acts as a conditioning device that makes the liker or lover tend to (1) ignore the faults of, and comply with the wishes of, the object of his affection; (2) favor people, products, and actions merely associated with the object of his affection, (...); and (3) distort other facts to facilitate love."
The potential danger starts when we can't think anymore rationally of the other person. When we like or even love someone the negative sides are in many cases ignored while there's a bigger focus on the positive ones. The point is not that this is generally bad. The point is, when we want to think rationally about a given problem this tendency can interfere. We prefer the points made by people we like more than the points made by people we don't like. So instead of making rational conclusions we tend to make conclusions based on liking or not liking someone. It is not just blindly in love, it is also half blind in liking. One example where this tendency can backfire deals with physical attractiveness: "Experiments show that attractive criminals are seen as less aggressive and get a milder punishment than ugly criminals. But like the sixth Century Greek writer Aesop wrote, "Appearances are often deceiving." The antidote could be that we focus on the argument laid out and not on the subjective side of how much we like or dislike a person.
Similar to the liking and loving tendency from before this tendency can also work in two ways. When people are critiquing us or giving us some bad comment we tend to disle them and this dislike makes other person dislike us more.
"Disliking/hating tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues and the object of dislike; (2) dislike people, products, and actions merely associated with the object of his dislike; and (3) distort other facts to facilitate hatred."
The same as love can blind us, hate blinds us too. We see only the negative sides ignoring the positive ones. The antidote to this tendency is also here listening to the argument laid out and not on the subjective side of how much we dislike a person.
"The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision."
Charlie Munger on this tendency probable evolutionary background: "After all, the one thing that is truly counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do."
What are possible triggers for the doubt avoidance tendency? "Well, an unthreatened man, think thinking of nothing in particular, is not being prompted to remove doubt through rushing to some decision. (...) [W]hat usually triggers doubt-avoidance-tendency is some combination of first puzzlement and second stress."
Many of us prefer certainty over uncertainty and order over chaos. When we doubt something we find ourselves in a state of uncertainty. It easier to just make one decision and remove the doubt as fast as possible. This is probably a good technique when we are immediately threatened, have no time to think, and have to immediately react. But consider judges who would show this tendency. Instead of thinking of other possible scenarios they just stick with one scenario and remove doubt as fast as possible, that would be fatal. That's why in Charlie Munger's words they are, at least ideally, "wear mask of objectivity". Instead of rushing to some decisions, judges hear all sides and retreat to make decisions to be minimally influenced. The most important part of this retreat, in case of avoiding the doubt-avoidance tendency, is time. Time to think. Time to be uncertain and to allow doubt in order to make better decisions.
"The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance."
The inconsistency tendency can work in good and bad ways. For instance. rather than act inconsistently with public commitments, new or old public identities, etc., most people are more loyal in their roles in life as priests, physicians, citizens, soldiers, spouses, teachers, employees, etc." We want to look consistent with our role may that be in society. the family, or in an organization.
Now in one place this tendency can have really negative consequences consider the building of bad habits: "When Marley's miserable ghost says, "I wear the chains I've forged in life", he's talking about chains of habits that were too light to be felt before they became too strong to be broken." How often do we start small with something bad? Like one alcoholic drink is fine and one cigarette is okay. Faster than we can watch out a bad habit is established.
Are there any ways to prevent the negative sides of the inconsistency avoidance tendency? "The rare life what is wisely lived has in it many good habits maintained and many bad habits avoided or cured. And the great rule that helps here is again from Franklin's Poor Richard's Almanack: "An ounce of prevention is worth a pound of cure". What Franklin here is indicating, in part, is that inconsistency-avoidance tendency makes it much easier to prevent a Habit than to change it." First, try to stop yourself from starting something bad even if it's in the beginning something small. If you start, try to break it as fast as possible.
Be aware of the first-conclusion bias. The bias to takes the first conclusion as our conclusion. Maybe you can remember when you were a little child or when you look at little children running around, we can see how naturally curious they are. They want to explore everything and go everywhere. We could probably go so far as to say that we are born curious. However, the older we get many of us lose this inborn curiosity or maybe not loose it, more it gets buried in us or gets made blunt. Formal education is a place where our curiosity can be ignited or made blunt. Often I am reading about our school systems that they destroy the curiosity of children. But at the same time, it can also be the place that ignites or keeps up the curiosity of children.
"Curiosity, enhanced by the best of modern education - which is, by definition, a minority part in many places - much helps man to prevent or reduce bad consequences arising from other psychological tendencies. The curious are also provided with much fun and wisdom long after formal education has ended."
Why is curiosity important? Well, in our context, curiosity is in itself an antidote to many of the negative effects of the psychological tendencies we are discussing here. Through being curious we are more open-minded and can therefore better listen to contradictory opinions and facts. For this tendency we don't need some antidote, rather something that is strengthen it. One way to strengthen it is the notion of continuous learning, which was at the heart of the second video of this video series. Diving into many topics, looking for what catches our attention and keep learning.
"Kant was famous for his categorical imperative, a sort of golden rule that required humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody."
Let's have a look at some examples to show the point: "Moreover, there is in modern human culture a lot of courteous lining up by strangers, so that all are served on a first-come-first-served basis." Imagine the employer, the general, or someone higher in the hierarchy says the following: "I will never ask of you a duty I would not be willing to perform myself." I guess most people would immediately have more respect for that person because this person acts fair. On the other side, when someone does not act fair, as we maybe expected, it can lead to tension and problems. Everyone lines up in the line, first-come-first-served, but one person skips the line and goes to the front. We, or people (in general), will be not amused by that.
When food is scarce and we see food in another person's hand, we want that, especially when we are starving. "It's not greed that drives the world but envy." I assume here that we all, or at least the majority, experienced in some way or another envy or jealousy. It is not a topic we talk much publicly about but it is a topic that accompanies many of us, some more and some less.
"Financial historian Charles P. Kindleberger says in Maniacs, Panics, and Crashes: "There's nothing so disturbing to one's well-being and judgment as to see your friend get rich.""
What are antidotes against Envy? Three ways to overcome Envy which I borrow here from Shane Parrish. "The first is to focus on the differences between you and the other person rather than the similarities. Examine the situation, you're not as alike as you think you are. The second is more difficult (...). Shape your malicious Envy into a drive to improve and learn. Thirdly, envy can be avoided over time with simple repetitive denial. Don't let yourself become envious of others deserved success. Stop the feeling in its tracks, if you can. As for undeserved success, remind yourselves that the world is not a fair place that owes us what we wish. Remind yourself that the success of others does not reflect on you and does not take away from you."
Personally I find those antidotes extremely helpful. From my own experience I can say that this is hard work, at least for me. Still, it's worth it. From my side what I can add is to only compare ourselves with ourselves. This is like similar to the first point of Shane Parrish's three points. When we want to find someone as similar as we are it can only be ourselves or like the person we were in the past, right? This is the only fair comparison actually we could make.
"The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as extreme, as it is in apes, monkeys, dogs, and many less cognitively gifted animals. The tendency clearly facilitates group cooperation for the benefits of members."
Reciprocation underlies many areas where humans interact. One of those is commercial trade. It is obvious that commercial trade, a fundamental cause of human prosperity, is enormously facilitated by man's innate tendency to reciprocate favors."
This tendency is highly applicable for positive use in all our lives. According to Peter Kaufman, who was the force behind the book Poor Charlie's Almanack, it is good to go first and to go positive. "All you have to do, if you want everything in life from everybody else, is first pay attention, listen to them, show them respect, give them meaning, satisfaction, and fulfilment. Convey to them that they matter to you. And show you love them. But you have to go first. And what are you going to get back. Mirrored reciprocation."
In addition a concrete example of Peter Kaufman's words: "You're standing in front of an elevator. The doors open. And inside the elevator is one solitary stranger, you've never met this person before in your whole life. You walk into the elevator you have three choices for how you're going to behave as you walk into this elevator. Choice number one you can smile and say good morning. And I say, at least in California, if you do that 98% of the time the person will smile and say good morning back. You can test it. Okay. My guess is you're going to find that 98% of the time that people say good morning. Choice number two. You can walk in and you can scowl and hiss at the stranger in the elevator. And they have no idea why you are scowling and hissing at them. And I say 98% of the time they may not hiss back at you but they will scowl back at you. And option number three, this is where the wisdom comes. You can walk into the elevator and you can do nothing. And what do you get 98% of the time if you walk into an elevator and you do nothing from that stranger in the elevator? Nothing. It is mirrored reciprocation isn't i? But what did you have to do? You have to go first and you're going to get back whatever you put out there."
Generally Charlie Munger thinks the Reciprocation tendency is doing much more good than harm. Somehow it is innate in us humans and is on most occasions beneficial. There are always people who use this in a shady way. Let's not be those ones. In addition, we try to be aware of it when that's working against us.
"Some of the most important miscalculations come from what is accidentally associated with one's past success, or once liking and loving, or once disliking and hating, which includes a natural hatred for bad news."
"For instance, consider the case of many men who have been trained by their previous experience in life to believe that when several similar items are presented for purchase, the one with the highest price will have the highest quality."
I include myself in the category of persons who were fooled into thinking that the highest price means the highest quality. Obviously, that isn't always true. Especially brands with high Prestige charge premiums just because they put their name on a product, while the quality doesn't necessarily have to be better than some cheaper product.
"A final serious clump of bad thinking caused by mere association lies in the common use of classification stereotypes. Because Pete knows that Joe is 90 years old and that most 90-year-old persons don't think very well, Pete praises old Joe as a thinking klutz even if old Joe still thinks very well. Or, because Jane is a white-haired woman and Pete knows no old woman good at higher math, Pete appraises Jane as no good at it even if Jane is a whiz."
When we do classifications we miss the extremes. On average old people think probably less good than younger folks but there are some old people who think much better than a young person. But of course it is easier to classify, to make a fast decision, which is in the end preserving energy, right?
"Another common bad effect from the mere association of a person and a hated outcome is displayed in Persian messenger syndrome. Ancient Persians actually killed some Messengers whose sole fault was that they brought home truthful bad news, say, of a battle lost. It was actually safer for the messenger to run away and hide instead of doing his job as a wiser boss would have wanted it done. Persian messenger syndrome is alive and well in Modern Life, albeit in lethal versions. It is actually dangerous in many careers to be a carrier of unwelcome news."
Not delivering bad news but instead putting them under the rock can be fatal. Especially when we are on the receiving end of bad news it could be useful to learn to control our emotions and not to let them out on the messenger, probably even thanking the messenger for bringing them up if nobody else would.
"We deny and distort reality to feel more comfortable, especially when reality threatens our self-interest. To quote the Austrian psychologist Sigmund Freud: "Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead.""
Charlie Munger on some examples from his own experience: "This phenomenon first hit me hard in World War II when the super athlete, super student son of a family friend flew off over the Atlantic Ocean and never came back. His mother, who was a very sane woman, then refused to believe he was dead. That's simple, pain avoiding psychological denial. The reality is too painful to bear so one distort the facts until they become bearable."
It can be extremely dangerous for us and everyone around us when we fall into some kind of delusional state. "In chemical dependency, wherein morals usually break down horribly, addicted persons tend to believe that they remain in respectable condition, with respectable prospects. They thus display an extremely unrealistic denial of reality as they go deeper and deeper into deterioration."
My next words now fall into the category of easy to say hard to do. Not accepting reality no matter how painful it is doesn't brings us one step further. Life has its ups and downs but to deny the downs is to deny our ability to get through them.
"But some people hope to leave life hewing to the iron prescription "It is not necessary to Hope in order to persevere. And there is something admirable in anyone able to do this.""
"(...) like the 90% of Swedish drivers who judge themselves to be above average."
Overestimating our skills or observing others to overestimate their skills, or themselves, is a tendency to be aware of, because it can lead to foolish and probably preventable errors "(...) extremely counterproductive is man's tendency to bet, time after time, in games of skill, like golf or poker, against people who are obviously much better players. Excessive self-regard tendency diminishes the foolish bettor's accuracy in appraising his relative degree of talent. More counterproductive yet are men's appraisals, typically excessive, of the quality of the future service he is to provide to his business. His over-appraisal of these prospective contributions will frequently cause disaster."
To overestimate oneself can also have positive effects: "While an excess of self-regard is often counterproductive in its effects on cognition, it can cause some weird successes from overconfidence that happens to cause success. This factor accounts for the adage: "Never underestimate the man who overestimates himself.""
The last sentence Charlie Munger repeated at a shareholder meeting in regards to Elon Musk. Now I don't know if Elon Musk is overconfident or not but let's assume he is. We can clearly see what it brings. The aim of doing something great and probably overestimating oneself in the process of achieving it, positively pushes the limit of oneself.
What can we do against the bad side of overestimating? "The best antidote to folly from an excess of self-regard is to force yourself to be more objective when you are thinking about yourself, your family and friends, your property, and the value of your past and future activity. This isn't easy to do well and won't work perfectly but it will work much better than simply letting psychological nature takes its normal course."
Coming back to our Elon Musk example. I think that it is possible to be objective and at the same time still go against the odds, like Elon Musk. He's aware that some years ago his company SpaceX had a low probability of succeeding. He's objective about it but still he dares to push through and bet on his low probability of success because he probably overestimate himself. So he's objective with a chance of success but subjective in overestimating himself. Does it make any sense to you?
"an optimist is a person who sees a green light everywhere, while the pessimist sees only the red stoplight. The truly wise person is colorblind."
Consider we are building a startup. We have cash reserves for one year and a little family at home. After one year we have no cash left and the startup isn't looking good. Well we have two choices. Either shut it down which would be the realistic way because we have responsibility for our family. Or we stay optimistic and push more through. Now, of course, this one extra month can make the startup working and everything is fine but what if the setup still doesn't work and we are letting our family down only because we can't face reality? This should not be to discourage someone from following his or her dreams and I guess being determined and not giving up is honorable but sometimes we got other people on our boat too for which we got responsibility.
"The quantity of man's pleasure from a $10 gain does not exactly match the quantity of his displeasure from a $10 loss. That is, the loss seems to hurt much more than the gain seems to help. Moreover, if a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away. I include the natural human reactions to both kinds of loss experience - the loss of the processed reward and the loss of the almost possess reward - under one description deprival-superreaction tendency. The late Daniel Kahneman and Amos Tversky call this loss of version as a framework for the prospect theory.
Consider the following example from Daniel Kahneman's book "Thinking Fast and Slow": "You are offered a gamble on the toss of a coin. If the coin shows tail you lose $100. If the coin shows heads you win $150. Is this gamble attractive? Would you accept it? To make this choice, you must balance the psychological benefit of getting $150 against the psychological cost of losing $100. How do you feel about it? Although the expected value of the gamble is obviously positive, because you stand to gain more than you can lose, you probably dislike it - most people do. In this example the deprival-superreaction could be at play as one of the strong psychological influences. Of course it also matters if you are a millionaire or extremely poor. If a person is extremely poor the person can't afford to lose $100 no matter what. And will for sure not do it. For everyone who is not extremely poor, rationally considered, that would be a sound bet. But subjective beings as we are, when we feel more pain in losing and joy in winning, many don't do it. And what can we do against it? As so often trying to be more objective and not be guided by feelings. We could miss many favorable opportunities in life only because we are so scared of losing something even if this losing something has nearly no objective effect on us."
"The otherwise complex behavior of man is much simplified when he automatically thinks and does what he observes to be thought and done around him. And such followership often works fine. For instance, what simpler way could there be to find out how to walk to a big football game in a strange city than by following the flow of the crowd."
It is difficult to go against a crowd. Why? Because we have to come up by ourselves with something. Sometimes it is efficient to follow the crowd, sometimes not. "If 40 million people say a foolish thing, it does not become a wise one."
Social media is an amplifier of social proof. We get bombarded with opinions and when we click on one opinion we get likely bombarded with more posts from a similar opinion. If we didn't made up our mind about a topic or we are not so stable in our opinion about it, sooner or later, we probably just adopt the opinion which the mass has.
"In Social-Proof, it's not only action by others that misleads but also their inaction in, the presence of doubt, inaction by others becomes social proof that inaction is the right course." A famous example of the social proof in inaction, is the bystander effect. The bystander effect is grounded in the notion that individuals become less inclined to offer assistance or intervene on behalf of a perceived victim when others are present. When encountering a person in distress, such as someone lying on the street, we tend to assume that either someone else will step in to help or that the situation may not be as urgent as it appears, especially when no one steps in. Because when no one steps in, it must be surely nothing, right? But now imagine when everyone thinks that, no one will do something. This phenomenon illustrates the principle of social proof, wherein people imitate the inaction of others in a group setting.
"When will social-proof tendency be most easily triggered? Here, the answer is clear from many experiments: Triggering most readily occurs in the presence of puzzlement or stress and particularly when both exist." It makes sense because when we feel stressed or uncertain we follow along more easily than when we are in our own four walls where everything is certain and we know the environment.
Some more thoughts on social proof from Charlie Munger: "Because both bad and good behavior are made contagious by social proof tendency, it is highly important human societies, first, stop any bad behavior before it spreads, and second, foster and display all good behavior."
What can help us in situations where we have to take the initiative? It helps what Charlie Munger says to display good behavior, so that we are led by a good example. As so often it's much easier to talk about it than to do it. "If only one lesson is to be chosen from the package of lessons involving social proof tendency and used in self-improvement, my favorite would be: Learn how to ignore the examples from others when they are wrong because few skills are more worth having."
"Because the nervous system of man does not naturally measure in absolute scientific units, it must instead rely on something simpler. The eyes have a solution that limits their programming needs: the contrast in what is seen is registered. And as in sight, so does it go, largely, in other senses. Moreover, as perception goes, so goes cognition. The result is man's contrast- misreaction tendency."
This tendency can be easily used against us especially in sales: "A particularly reprehensible form of sales practice occures in the offices of some real estate brokers. A buyer from out of the city, perhaps needing to shift his family there, visits the office with little time available. The salesman deliberately shows the customer three awful houses at ridiculously high prices. Then he shows him a merely bad house at a price only moderately too high. And boom, the broker often makes an easy sale."
This has far broader implications than just in sales. When a company gets a so-called overnight success we only see how this company goes from 0 to 100. This is a huge contrast because that's what we see and get triggered by. But what we don't see but what the company owner sees is the work that this person put in, over years, step by step. In reality that wasn't an overnight success but incremental progress. Since incremental progress does not show big contrast it is for us less visible and the danger of overlooking incremental changes explained by Warren Buffett: "(...) it is like eating about 300 calories more each day than you burn up; it has no effect on you today. You don't get up from the table and all of a sudden everybody says, "My God, you look fat compared to when you sat down!" But, if you keep doing it over time, the incremental problems are hard to attack because that one extra piece of pie doesn't really seem to make a difference."
One more example to push this into our brains. "One of Ben Franklin's best remembered and most useful aphorisms is "A small leak will sink a great ship." The utility of the aphorism is large precisely because the brain so often misses the functional equivalent of a small leak in a great ship." We are blind to the small things which could step by step lead to big outcomes. We only see the big things which lead to a big outcome.
What can we do against this principle? We can judge things by themselves and not by comparing them or seeing them in any contrast to something else. Judging things in absolutes and not so much in relatives.
"Everyone recognizes that sudden stress, for instance from a threat, will cause a rush of adrenaline in the human body, prompting a faster and more extreme reaction. And everyone who has taken Psych 101 knows that stress makes social- proof tendency more powerful. In a phenomenon less well recognized but still widely known light stress can slightly improve performance - say, in examinations - whereas heavy stress causes dysfunction. The physiological consequences of stress will be not discussed here since there is so much research about this online and many experts can explain that much better than I could. The point that is important for us here stress can be positive and negative."
"(...) researchers try to find out the differences between business Executives who became sick from exposure to high stress and those who didn't. They found that Executives who stayed healthy had a sense of commitment to work and family, felt in control, and had a positive attitude toward challenges. They saw challenges as part of life and an opportunity to grow."
What we can see here stress has different effects on different people. In addition, how we approach stress matters. Stress increases our suggestibility. Ivan Pavlov showed that animal behavior could be established or erased by exposing the animal to stress. For example, he could make a dog react aggressively to a caretaker with whom the dog was once very loyal. The same can happen to people."
Charlie Munger goes on to talk about Pavlov's experiments and his findings: "He found that first, he could classify dogs so as to predict how easily a particular dog would break down. Second, the dogs hardest to break down were also the hardest to return to their pre-breakdown state. Third, any dog could be broken down, and fourths, he couldn't reverse the breakdown except by reimposing stress." What I interpret out of it, is that if the stress is too big we can break down but not all hope is lost because we can recover of the breakdown. Just it involves stress again. So stress can kill us but also make us grow.
"Stress is neither good nor bad in itself. It depends on the situation and our interpretation. Stress can be controlled controlled by our attitudes. The austrian Physician Dr Hans Selye (I don't know if I pronounce this name now correctly) says in Stress without Distress that it is not stress that harms us but distress. We need challenges. He continues, "Without stress there would be no life (...) Complete freedom from stress is death.""
The antidote to stress is not necessarily less stress it is more about how we deal with stress. I made a whole video on the topic of post-traumatic growths, this is when we have stressful events, maybe even traumatic events that we don't fall into some trauma but that those events makes us grow. We need stressors, obviously those that don't kill us, to grow. If you're interested in that the link you will find in the description below.
"Man's imperfect limited capacity brain easily drifts into working with what's easily available to it."
Here is the positive use of the availability-misweighing tendency: "Still, the special strengths of extra-vivid images in influencing the mind can be constructively used (1) in persuading someone else to reach a correct conclusion or (2) as a device for improving one's own memory by attaching vivid images, one after the other, to many items one doesn't want to forget."
We could think traveling by airplane is more risky than traveling by car. While in fact, it is the opposite. The media just covers airplane crashes much more intensely. The images and information of airplane crashes are more vivid and come easily to our minds.
According to Charlie Munger there are some antidotes to this tendency. One way to be less influenced by this tendency is to actively seek disconfirmation. Normally, we are more likely to look for confirmation when we have some idea we are more likely to look for evidence or information which confirms our idea. In additio,n we can surround ourselves with skeptical people which goes hand in hand with seeking disconfirmation. To counterbalance this tendency we can remind ourselves of the following: "One consequence of this tendency is that extra vivid evidence, being so memorable and thus more available in cognition, should often consciously be underweighed while less vivid evidence should be overweighed. (...) The great algorithm to remember in dealing with this tendency is simple: An idea or a fact is not worth more merely because it is easily available to you."
"All skills attenuate with disuse. I was a whiz at calculus until age 20, after which the skill was soon obliterated by total non-use."
This was a short version now comes a long one: "Throughout his life a wise man engages in practice of all his useful, rarely used skills, many of them outside his discipline, as a sort of Duty to his better self. If he reduces the number of skills he practices and therefore the number of skills he retains, he will naturally drift into error from man-with-a-hammer tendency. (...) Skills of a very high order can be maintained only with daily practice. The Pianist Paderewski once said that if he failed to practice for a single day he could notice his performance deterioration, and that after a week's gap in practice, the audience could notice it as well. The hard rule of use-it-or-lose it tendency tempers its harshness for the diligent. If a skill is raised to fluency, instead of merely being crammed in briefly enable one to pass some test, then the skill 1) will be lost more slowly and 2) will come back faster when refreshed with new learning. These are not minor advantages and a wise man engaged in learning some important skill will not stop until he is really fluent in it. The most available example is the use or non-use of mental models. The mental models in this series are only useful for us when we practice them, when we use them actively. Otherwise we will forget them over time."
"This tendency's destructive power is so widely known to be intense, with frequent tragic consequences for cognition and the outcome of life, that it needs no discussion here to supplement that previously given under simple, pain avoiding psychological denial."
"With advanced age there comes a natural cognitive decay, differing among individuals in the earliness of its arrival and the speed of its progression. Practically no one is good at learning complex new skills when we very old. But some people remain pretty good at maintaining intensely practice old skills until late in life as one can notice in many a bridge tournament."
Until we reach a certain age our bodies and Minds start to decay. Old age influences us whether we want it or not. But here we can fall again in some sort of classification to say that old people are less fit or have less good memory. While this may be true on average it isn't in single cases.
What are possible antidotes to do against this tendency? "Continuous thinking and learning done with joy, can somewhat help delay what is inevitable." It goes hand in hand with the previously mentioned use-it-or-lose-it tendency. We can stay more or less fit and sharp if we use our bodies and minds. We will decay, of course, but much more slowly.
"Living in dominance hierarchies as he does, like all his ancestors before him, man was born mostly to follow leaders, with only a few people doing the leading."
Many times it is wise to follow authority. We are and can't be experts in all areas. But what if the authority is wrong? Or the authority ideas are not received correctly?
"[Taken from Cialdini's book Influence] A physician left a written order for a nurse treating an earache, as follows: "Two drops, twice a day, r' ear." The nurse then directed the patient to turn over and puts the eardrops in his anus."
Thinking for ourselves can be helpful instead of blindly following instructions. "One cannot assert authority by accepting one's own fallibility. Simply, people need to be blinded by knowledge - we are made to follow leaders who can gather people together because the advantages of being in groups trump the disadvantages of being alone. It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. Those who have followed the assertive idiot rather than the introspective wise person have passed us some of their genes."
A general antidote by Charlie Munger is to be careful who we appoint to power. It will be hard to remove afterward because with authority-misinfluence tendency people will often have too much respect or fear to speak up. This leads to the point that even a bad leader stays often way too long in a position of power and authority.
"Man, as a social animal who has a gift of language is born to prattle and pour out twaddle that does much damage when serious work is being attempted. Some people produce copious amounts of twaddle and others very little."
There's a principle of noise and signal. Noise is twaddle. The talk that doesn't add any value, or even worse distracts from the value causing damage. Signal on the other hand is the talk which is valuable and useful. What helps me personally to do against this tendency because I am sometimes guilty of it is to say nothing when I have nothing valuable to say. Now this functions when I have to create these videos because I have time and can scan them through. But in a talk or like in a conversation where everything happens fast I sometimes find myself producing noise.
"It makes man especially prone to learn well when a would-be teacher gives correct reasons for what is taught instead of simply laying out the desired belief ex-cathedra with no reasons given. Few practices, therefore are, wiser they not only thinking through reasons before giving orders but also communicating these reasons to the recipient of the order."
In the second video of this Charlie Munger Mental Model Series we talked a lot of the importance of "Why". especially in communication. We have here the reason why it's so effective. People like to know the "why", especially when they have to do something. Here's the 5W's mental model, in short, again: "You had to tell Who was to do What, Where, When, and why. And if you wrote a communication leaving out your explanation of why the addressee was to do what was ordered, Braun was likely to fire you because Braun well knew that ideas got through best when reasons for the ideas were meticulously laid out."
There are also downsides of this tendency especially when the reasons we are given are wrong. There can be reasons just reasons which are wrong or maybe even some we don't fully understand. Thanks to this tendency we still are more likely to comply because a reason is a reason. Here's one of Charlie Munger's example to this: you're waiting to get to the copy machine and someone gets in front of you and says "I have to make some copies". This is a reason but not an adequate one. Be careful when other people just talk and give some reasons. The reasons given can be not fitting, like not making any sense, but still there are reasons so we can get blinded by them.
"You get lollapalooza effects when two, three, or four forces are all operating in the same direction. And frequently you don't get simple addition. It is often like critical mass and physics where you get a nuclear explosion if you get to a certain point of mass and you don't get anything much worth seeing if you don't reach the mass."
Important to notice that our psychological Tendencies are just accumulating when they work in the same direction. When the envy tendency works for example in Direction X and the authority-misinfluence tendency works for example in Direction Y they are not accumulating.
One of the most famous psychological experiments is the milligram experiment. Just a short note here: in today's standards this experiment is quite biased. It is used here to show the lollapalooza effect and it's not about the scientific rigor or quality of the experiment. The milgram experiment was conducted by Stanley Milgram in the early 1960s. It was aimed at studying how people would obey authoritative figures. The experiment was structured as follows: A volunteer assumed the role of a teacher and were paired with a Confederate, an actor. The experiment had two separate rooms, one housing the volunteer in the role of the teacher with control over an electric shock apparatus. And the other containing the Confederate, the learner. During the experiment the teacher posed questions and whenever the learner made an error the teacher was directed to administer electric shocks. The severity of the shocks increased with each subsequent mistake. An authoritative figure embodied by an experimenter in a lab coat, provided constant instruction to the teacher urging them to continue administering shocks even in the face of evident distress from the learner. The results were that the majority of the volunteers gave so strong shocks that the person who received the shocks would die. They often didn't stop even when the learner was screaming or showing signs of distress. Mainly, for many decades, this experiment was seen as a power of authority, while in fact, Charlie Munger argues, there are many Tendencies simultaneously working in the same direction.
"Almost any intelligent person with my checklist of psychological tendencies in his hand would, by simply going down the checklist, have seen that Milgram's experiment involved about six powerful psychological Tendencies acting in confluence to bring about his extreme experimental result. For instance, the person pushing Milgram shock lever was given much Social-Proof from the presence of inactive bystanders whose silence communicated that his behavior was okay. Yet it took over a thousand psychological papers published before I got to Milgram, for the professoriate to get his experiment only about 90% as well understood as it would have immediately been by any intelligent person who used 1) any sensible organization of psychology along the lines of this talk plus 2) a checklist procedure."
So let's see what Tendencies are here at work: For sure we have the authority-misinfluence tendency. We have the social proof tendency. We have also probably the reason-respecting tendency. We have the stress-misinfluence tendency. We have also the doubt avoidance tendency because we have so much psychological stress there that we just want to avoid doubt right. We want to avoid doubt about our own decisions. We have probably also the inconsistency-avoidance tendency, that we don't want to look inconsistent. So when we first gave the shock we do more and more shocks because we already gave the first one. So as you can see there are many Tendencies working in the same direction and and all of them together create lollapalooza effect.
We started this video series with "Is is there anything I can do to make my whole life and my whole mental process work better?" And I would say that developing the habit of mastering the multiple models which underlie reality is the best thing you can do."
Now we end this video series and hopefully you could acquire some useful mental models that could probably improve your cognition and probably even your life. Now I would be really interested in how did you find this whole video series or how did you like this video? For any kind of feedback, positive or negative, I would be really happy or really grateful about and you you can write it to me in the description below. If you got any value out of it maybe you can consider give it a like or maybe subscribe to my channel. And now if you're interested in the first two parts of this video series, like part one and two in this playlist, you can find them here. If you are interested in Charlie Munger's life Philosophy you can find a video about it here.
"Well, so much for the basic microeconomics models, a little bit of psychology, a little bit of mathematics, helping create what I call the general substructure of worldly wisdom."