You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right-and that's the only thing that makes you right -Warren Buffett

I’m not writing this post because I’ve suddenly become all sage-like and have wisdom leaking from my ears in bucketloads. Rather, this is probably the best thing I read about last year and I think every person in this world will benefit from knowing this as well.

We cannot deny that our actions are governed by our brain (Yes, even the whole action of salivating when you’re hungry and you smell or see something delicious is your body acting upon the signals your brain sends you despite what many people describe to be uncontrollable actions), so what better way to improve our lives than to improve how we think?

Charlie Munger spoke about this in a speech titled ‘The psychology of human misjudgment’. The psychological tendencies that he mentioned are as follows:

  1. Reward and Punishment superresponse tendency
  2. Liking/Loving tendency
  3. Disliking/Hating tendency
  4. Double-Avoidance tendency
  5. Inconsistency-Avoidance tendency
  6. Curiosity tendency
  7. Kantian Fairness tendency
  8. Envy/Jealousy tendency
  9. Reciprocation
  10. influence from mere association tendency
  11. Simple, pain-avoiding psychological denial
  12. Excessive self-regard tendency
  13. Overoptimism tendency
  14. Deprival superreaction tendency
  15. Social-proof tendency
  16. Contrast misreaction tendency
  17. Stress influence tendecy
  18. Availability misweighting tendency
  19. Use it or lose it tendency
  20. Drug misinfluence tendency
  21. Senescense tendency
  22. Authority misinfluence tendency
  23. Twaddle tendency
  24. Reason respecting tendency
  25. Loolapalooza tendency- The tendency to get extreme confluences of psychological tendencies acting in favour of a particular outcome

Now, it isn’t enough to know what each psychological tendency and its effects are but to take things one step further and acknowledge that in situations, there are often more than one psychological tendencies in play. This is where having a latticework of the above models is useful.

For example, consider the case of a cult.

Why do people join cults? To the outside observer, it would seem plenty silly to see a bunch of people engaged in rituals that, going to the extreme, involve mass suicide or perhaps donating their entire wealth to a body of belief. However, if we go through the list above, we can see that there are a few tendencies at play:

– Inconsistency-Avoidance
– Social-proof
– Authority misinfluence
– Reason respecting
– Loolapalooza!!!

Now, bear with me as I run through the scenario and fit these in:

Your friend knows you’ve been feeling a little depressed lately due to your recent retrenchment and breakup with your girlfriend/boyfriend. Over a few drinks (Drug misinfluence), he/she tells you that there’s a ‘Church’ that he/she’s recently discovered and thinks that the teachings there may help you get over this troubling time. So you say, ok, let’s check it out.

You get there and before the Head Honcho starts his sermon proper, you mingle around and find that, hey, the people here seem like pretty nice and normal folk. Then the Head Honcho starts his sermon and says some points that you don’t really agree with but man, everybody seems to be agreeing on his point (Social proof). After a while, everyone engages in some chanting (Social proof) and you join in.

Then the Head Honcho passes some wine around and everyone drinks from a communal bowl. You drink too and hey, why not? It’s good stuff. The Head Honcho then continues his preaching and this time, somehow his reasons seem pretty convincing (Reciprocity and Reason respecting).

You go back over the next few weeks and with each passing week, you are more convinced than ever that some imminent disaster is upon the world- so bad in fact, that your losing your job and lover seems trivial now. You’ve given away your house, car and whatever money you have to the ‘Church’. After all, if everyone’s going to die, what good are those? (Inconsistency Avoidance)

The Head Honcho then tells everyone, “Let’s kill ourselves because that will deliver us to Mother Kalopaloola.” Everyone in the cult commits mass suicide. (Reciprocity, Authority Misinfluence, Inconsistency Avoidance, Reason respecting, Loolapalooza!)

Now, the above is a purely fictional but not quite far-fetched. There have been cases of mass suicides (e.g. Heaven’s Gate, Order of the Solar Temple etc.) well-documented and I think you would find that they haven’t been too different from the scenario described above.

I used an example that was perhaps extreme but if we look around us, we can see everyday examples of where our psychological tendencies lead us to error. I’m not posting they entire speech Charlie Munger made. You can read it here or better yet, head over to this site to buy a copy of Poor Charlie’s Almanack. Charlie Munger developed much of his psychological tendencies from Robert Cialdini’s book ‘Influence’ which has the lot of academic references underpinning the ideas here but I think mastery of the above list would be more than enough for most people.