Source: red and green

Charlie Munger created a thought model that misjudged psychology. What I'm saying is that people have 25 psychological tendencies, that is, mindsets, which affect your judgment when you don't know it.

Let me tell you something about Charlie Munger.

I. "Poor Charlie" and "Poor Richard"

Munger is Buffett's partner, and Buffett says he is the smartest guy he has ever seen. Fate binds them together to become lifelong partners, but if fate were not arranged in this way, Munger would have achieved success of his own, just as Buffett would.

Munger had a simple experience. Born in Omaha, Nebraska, Munger worked for Buffett's grandfather Buffett Sr. in the grocery store as a child, attended the end of World War II, attended the California Institute of Technology, graduated with honors from Harvard Law School, and worked as a lawyer for a few years. Then quit, focus on investment, stand shoulder to shoulder with Buffett and become a super investor.

Munger is clever but not clever. His idol was Franklin, the founding father of the United States, but I didn't see him talk about Franklin's great deeds. Instead, he quoted the Poor Richard Yearbook (Poor Richard's Almanack), which Franklin coined when he was young.

Franklin started from scratch and did not receive much good education. He ran the Poor Richard Yearbook and wrote it all by himself. How is his writing level? He found the articles of the author he appreciated, imitated the way he wrote them, practiced repeatedly, and aimed at the practice, such as learning from each other, and polishing like grinding. These are not shortcuts and cleverness, but stupid methods and great wisdom.

Munger did the same, and Munger put his life experience and investment experience into a book called the Book of Poor Charlie (Poor Charlie's Almanack). Have you noticed that only the names of the two people in the middle are different? he is paying homage to his idol.

Many years ago, Munger gave three lectures at his two alma mater, California Institute of Technology and Harvard University, on the psychology of human misjudgment (The Psychology of Human Misjudgement). Fifteen years later, he integrated the three speeches into a long article.

In the preface, Munger explains why he did it, admitting that he knows nothing about academic psychology. The reason for integrating, processing and republishing is that these things are very useful to Munger, so "save something useful for future generations, and leave my sword to those who can wield it."

Why does Munger want to practice his psychology? Because the world we live in is created by all kinds of misjudgments. Whether you want to avoid falling into the same misjudgment trap, to avoid being misjudged by others, or to benefit from it, first, you need to know what common misjudgments are, and second, you must have a more reliable cognitive framework.

He flipped through several psychology textbooks and found it useless, so he got on his horse and used Franklin's method to forge psychology that worked for him.

Charlie Munger's life switch

The local method forged by Charlie Munger has two main characteristics:

The first is invert. Flipping means that if you want to know how to succeed, first know how to fail. Munger does not succeed in learning, but fails in learning. He looks for lessons from a variety of failed decisions and flips them over to get clues to good decisions.

He used to say, "tell me where I'm going to die, and I'll never go there." At first glance, it sounds like a joke, but in fact, the secret of learning has been made public.

The second is cross-boundary. This one is related to the previous one. Because Munger likes to start with the opposite, fools and stupidity are valuable learning materials for him. There are fools and fools everywhere, and Munger follows them wherever they are, watching carefully. Unwittingly across the industry barriers, discipline gap.

People are different. Some people rely on tools to do things, such as better modeling, quantification, faster, higher and stronger. Munger is a different kind of person. He does things by thinking about people.

Another legendary investor, Carl Icahn (Carl Icahn), is also in this party. Carl Icahn is one of the greatest investors alive today, his performance is no less than Buffett, but his style is completely different. Buy a lot of stocks, join the board of directors, fire CEO, oppress listed companies to repay shareholders, this is his way of playing. I heard him give a finance class to Yale students, and he came up and said, "I don't understand computers or anything, but I know people."

To understand people is to understand human nature, and human nature is extremely complex, so this road is a dangerous one. Human nature has not changed since ancient times, so it can also be a shortcut. As to whether it is a dangerous road or a shortcut, it depends on who you are.

There is a saying in go, it is called responding without thinking. "before you think about it, you play chess." this sentence is the consequence of the effect of mindset. I understand them directly as switches, that is, you react as soon as you dial these things.

Munger put forward 25 psychological tendencies in his psychology of human misjudgment, which are people's thinking patterns. The following is a list of the 20 you should know most, and the remaining 5 are attached at the end of the article.

The first switch is the excitation. It's a super switch. 'never underestimate the role of incentives, 'Mr. Munger said.' the importance of incentives cannot be overemphasized. As long as the motivation is useful, don't use anything else. Franklin said the same thing, persuading people by profit rather than reason.

The second switch is love. People yearn to love and be loved, so they turn a blind eye to the shortcomings of their loved ones, listen to their will, prefer what they love, and even do not hesitate to distort the facts. Love can push people to the top as well as to the bottom.

The third switch is hate. Hate and love are the mirror images, and people ignore the advantages of the haters and all the things associated with them, and do not hesitate to distort the facts.

The fourth switch is to hate uncertainty. People do not want to fall into a state of doubt and uncertainty and always want to make an immediate decision. This is an evolution, and those prey that do not act immediately have long been wiped out by predators in evolution. It has something to do with confusion and stress. The greater the confusion and stress, the more people want to get rid of doubt as soon as possible.

The fifth switch is consistency. People hate inconsistencies and always want to coordinate. This makes habits crucial. It is a quick way to maintain consistency in life. The result is that good habits get twice the result with half the effort and bad habits get twice the result with twice the effort when corrected. If this is combined with the previous pesky uncertainty, it could lead to terrible consequences: make decisions too quickly and never change.

The sixth switch is curiosity. It is one side that human curiosity is far greater than that of any animal. On the other hand, curiosity kills the cat.

The seventh switch is fair. Do not do to others what you do not want.

The eighth switch is jealousy. This is one of the oldest switches and must have come from evolution, because there is more jealousy between siblings than between strangers. The Bible forbids people to envy their neighbors with donkeys, but it is useless. Buffett even said that what drives the world is not greed, but jealousy.

The ninth switch is to return the favor with an eye for an eye. Without it, it would be impossible for humans to evolve cooperation. But it can also be used to manipulate people. You are naturally grateful for giving you a small favor, so you fall into a trap. The brain instinctively wants to return the favor, but it is not good at calculating numbers. How many people fell here.

The tenth switch is near the red. Even if two things are only superficially connected, they will also have a joint effect on people's judgment. That's why there are always handsome men and women in advertisements. When people like handsome men and beautiful women, they will have a good impression of the advertised products.

It doesn't hurt, but if you have Persian messenger syndrome, the consequences will be serious: the messenger who brings bad news will be killed by the king of Persia, and he will never hear the bad news again.

The eleventh switch is denial of reality. People will refuse to admit reality if it is too painful.

The twelfth switch is to pay too much attention to yourself. People always think that what they have is better and like people who are similar to themselves. the advantage is security, while the disadvantage is to form a small circle of the same kind, locked in a declining spiral of mutual appreciation. Great people, on the other hand, often clean their rooms and break up.

The thirteenth switch is overconfidence. This is closely related to the last switch, "overvalue yourself". Overconfident people also tend to overestimate their judgment of others, resulting in spending too much time on interviews, which is actually more effective on resumes.

How can I detoxify it? Think less about yourself, think more about probability, don't think about whether you can do something, think about the success rate before this thing.

The fourteenth switch is aversion to loss. People hate certain losses and even take great risks to avoid it.

Two go world champions compete for supremacy, one side made a small mistake, resulting in losses, admit losses, slowly down, the situation is bad but can still be long. He refused to accept it and chose to go all out at once and be defeated by the other side.

Alpha go would not be like him. Because this switch only belongs to human beings, not artificial intelligence.

The fifteenth switch is to find identity. Teenagers are much more influenced by their peers than their families, and so are adults.

Driven by a sense of identity to do unthinkable things, such as the ability of ordinary people to inflict unimaginable violence on others in a group. People are most motivated to seek identity in the face of confusion and pressure, so the first step in pyramid selling and cult organizations is to isolate people.

The sixteenth switch is the alignment. People are not good at making judgments about isolated things, and they need to make comparative judgments by reference. For example, it is difficult to judge whether it is cost-effective to buy something with 100 yuan, but if it was 50 yuan yesterday and 100 yuan today, it is easy to judge that it is not cost-effective.

Don't buy accessories, because the accessories business is based on the use of the switch. For example, to buy a car, many people will have a lot of accessories, just because compared with the total price of the car, the attachment price seems negligible, in fact, maybe other people's profits are mainly on the attachment.

Boil the frog in warm water, because every moment is only compared with the last moment, and there is no change until it boils. We are always good at making judgments and making comparisons, that is, relative perspectives, and are not very good at absolute perspectives.

The seventeenth switch is to attach importance to things that are easy to get. Munger said there was a lyric, "if the person I love is not around, I love the people around me." Su Bide, president of Yale University and a psychologist, also said that the most relevant thing about love is distance. Rabbits always eat grass at the edge of the nest.

The 18th switch is obedience to authority. Leaders are more likely to appear wise than ordinary people, even though they are ordinary people except for their positions.

The worship of power is not a characteristic of any nation, which is common to all mankind. For this reason, you have to be very careful about who you put in a position of power.

The nineteenth switch is everything for a reason. When you ask someone to do something, you must tell him why, because everyone wants to know why.

To what extent? As long as you add the word "because", no matter what is said later, others will give you a little more. This has been done a lot of experiments in psychology, you might as well try it, the effect will be obvious.

The twentieth switch is a master switch, a combination switch. If the front single switch is combined, the effect will be stronger.

For example, the combination of aversion to loss and the pursuit of consistency makes people keep betting on failures until they are all lost. For example, if the "obedience to authority" switch, the "pursuit of consistency" switch and the "search for identity" switch, then it is possible to create cults and terrorist organizations.

Looking back at the 25 switches, Munger says, they are neither good nor bad all the time. They are shortcuts to thinking.

First of all, we need to know that people share the same heart and mind. Each of us is no exception, all under the control of these 25 switches. Second, remember these 25 switches, and if you realize which switch we are being controlled by, there is an antidote.

Antidote to 25 switches

The antidote is nothing more than this:

First, check your decisions against 25 switches at any time. Knowing is getting is much better than being at a loss.

Second, it is best to have a cooling-off period and avoid impulses before making a decision.

Third, to calculate the probability, we can make the decision more secure.

Fourth, find the right frame of reference.

Fifth, it is no big deal to reconcile with the inconsistency.

Sixth, always face the truth, no matter how difficult it is.

In fact, most of these antidotes are directed at some of the switches we mentioned earlier. The most important part of this is:

You know these switches exist, so you have a monitoring system for yourself, and you are much less likely to misjudge because of these switches.

Attached: Charlie Munger wrote about the other five switches in the book.

1. pressure. Stress has a dual nature. To apply Pavlov's research on dogs, first, great stress will cause people to collapse, and second, if there is enough stress, everyone will collapse. Third, when the strongest people collapse, it is the hardest to recover.

The most interesting thing is the fourth point, the only way to recover is to re-exert great pressure.

two。 Use it into and out of it. Everyone knows that practice is the only way to improve. However, some skills are not commonly used and can only be practiced at any time, but they seem to be useless because there are few opportunities to use them.

These skills are dragon slaughtering skills. You may not be able to meet a dragon in your life, but what if you don't practice now?

3. Drugs are harmful. There's nothing to explain.

4. Aging. No one can continue to be good at learning new and complex skills in old age. The only way to delay the wear and tear is to keep thinking and learn with joy.

5. Nonsense. Everyone likes to talk nonsense, there is nothing you can do about it, but you have to try not to let people who talk nonsense disturb those who do business.

Edit / roy