Those who know me well know that I’m a huge Charlie Munger fan. I first learned about Charlie when one of his law partners spoke at my law school graduation ceremony. He quickly became someone I refer to as a “personal hero,” a description I use sparingly.
I heard Charlie say in an interview once that he had busts of only two people in his house in California: Benjamin Franklin and Lee Kwan Yu. If I had any busts in my house (I don’t, yet), the first would definitely be of Charlie Munger.
Of course, I was saddened by his passing in 2023. As consolation, I was grateful to have attended the Berkshire Hathaway Annual Shareholders’ Meeting in Omaha, Nebraska just a few months prior. It turned out that my first Berkshire meeting was Charlie’s last. I’ll never forget the day. After so many years of seeing him on videos or listening to his voice on recordings, it was great to see the man with my own eyes. It felt appropriate.
For those uninitiated with Munger, I implore you to do some reading and peruse his speeches. While he and Warren Buffett are often first thought of as great investors, and deservingly so, for me they’ve provided more of a moral compass. Both effortlessly dispensing with hearty wisdom and (un)common sense. It’s all very Midwestern American. Their sayings often remind me of things I heard from my maternal grandmother, born in Dubuque, Iowa in 1922.
Of all the teachings of Charlie Munger, the most prominent for me may be his lecture at Harvard University in 1995 called “The Psychology of Human Misjudgment”. In that speech, he went through his personally-developed list of human tendencies that cause us to make stupid decisions.
In about 90 minutes, Charlie hands out a set of keys: a cheat-code playbook to help you stay out of trouble. We all have these mental and emotional tripwires, baked into our psyche. Hardwired biases that cause us great harm and misfortune. Here he helps us learn what these things are, so we can know what to avoid.
If you’re unfamiliar with it, check out the lecture. Here are a few links: Youtube and transcript.
Our egos would have us believe that we are smart enough to exempt ourselves from these tendencies. But as the title of the speech suggests, the topic focuses on human misjudgment. None of us humans are exempt. Charlie was smart enough to realize that you can’t iron out these wrinkles in your thinking entirely, but you can develop a practice of identifying when they are likely to come up and then correct against them.
Not long after listening to the recording for the first time, I made a summary of the tendencies in my own words. At some point, I even made flashcards to help me remember them. I’ve probably listened to the recording of the speech more than 100 times, trying to drill it into my head. And again and again, I come back to this list and try to remind myself of these mental and emotional tripwires.
Here’s Munger’s list, side-by-side with my shorthand:
| Munger’s List | Samuel’s Shorthand |
| 1. Reward and Punishment Superresponse Tendency | 1. Incentives are superpowers. |
| 2. Liking/Loving Tendency | 2. Love makes you blind (to faults, negative associations, lies, etc.). |
| 3. Disliking/Hating Tendency | 3. Hate makes you blind (to virtue, positive associations, facts, etc.). |
| 4. Doubt-Avoidance Tendency | 4. Doubt causes unnecessarily quick decision-making. |
| 5. Inconsistency-Avoidance Tendency | 5. Change is hard to come by, especially in others; compel change through debate. |
| 6. Curiosity Tendency | 6. Curiosity leads to wisdom. |
| 7. Kantian Fairness Tendency | 7. Fairness (i.e. the “golden rule”) leads to either (a) reciprocity or (b) animosity. |
| 8. Envy/Jealously Tendency | 8. Envy/jealousy is a superpower. It outweighs greed. |
| 9. Reciprocation Tendency | 9. Reciprocation of both favors & disfavors should be expected. |
| 10. Influence-from-Mere-Association Tendency | 10. Mere association with success or failure skews one’s perception of reality. Trends don’t always predict destiny. |
| 11. Simple, Pain-Avoiding Psychological Denial | 11. Denial is a superpower. Pain avoidance is a superpower. |
| 12. Excessive Self-Regard Tendency | 12. Excessive self-regard leads to over-appraisal (of your capabilities, circumstances, etc.). But, self-pride for trustworthiness and integrity pays off over time. |
| 13. Overoptimism Tendency | 13. What you wish for, you will believe in. |
| 14. Deprival-Superreaction Tendency | 14. Reactions to losses are disproportionate to reactions to gains. Near misses create disproportionate willingness to press forward. |
| 15. Social-Proof Tendency | 15. Social acceptance is a superpower. It’s easier to “win the crowd” than the individual. |
| 16. Contrast-Misreaction Tendency | 16. Contrast greatly distorts clear thinking. “A small leak will sink a great ship.” –Benjamin Franklin |
| 17. Stress-Influence Tendency | 17. Acute stress causes dysfunction & fatigue. Light stress can improve mental clarity. |
| 18. Availability-Misweighing Tendency | 18. We tend to over-rely on information that’s closely available to us. |
| 19. Use-It-or-Lose-It Tendency | 19. Continuous use is required to counter atrophy. |
| 20. Drug-Misinfluence Tendency | 20. Drug & alcohol abuse distorts reality, and almost always involves moral breakdown and extreme denial. |
| 21. Senescence-Misinfluence Tendency | 21. Age diminishes learning faculties. |
| 22. Authority-Misinfluence Tendency | 22. Poor leadership is dangerous to follow and very difficult to remove. |
| 23. Twaddle Tendency | 23. Say-Something-Syndrome: Twaddling causes extreme dissonance and delay. |
| 24. Reason-Respecting Tendency | 24. Provide reasoning when giving instruction or making requests. Use “because”. |
| 25. Lollapalooza Tendency—The Tendency to Get Extreme Consequences from Confluences of Psychology Tendencies Acting in Favor of a Particular Outcome | 25. LOLLAPALOOZA: mixing any of the above tendencies exacerbates results. |
I anticipate revisiting this topic in future blog posts. I’ll provide some of Charlie’s examples from his speech and try to match them with my own real-life scenarios where I’ve seen these things play out.
I have a sticky note front and center on my desk that says: “What would Munger do?” The answer to that question, as it pertains to this particular topic, is: to continue to revisit this list.
Hence, this blog post. Yet another attempt at drilling it into my brain.