The Psychology of Human Misjudgment, a speech given in 1995 by legendary investor Charlie Munger, opened my eyes to how behavioral psychology can be applied to business and problem-solving.
Munger, for those of you who haven’t heard of him, is the irreverent partner of Warren Buffett at Berkshire Hathaway. He’s offered us such gems as: a two step process for making effective decisions and the work required to have an opinion.
And this talk on The Psychology of Human Misjudgment is one of the best you’ll ever hear.
My nature makes me incline toward diagnosing and talking about errors in conventional wisdom. And despite years of being smoothed out by the hard knocks that were inevitable for one with my attitude, I don’t believe life ever knocked all the brashness out of the man.
… I have fallen in love with my way of laying out psychology because it has been so useful to me. And so, before I die, I want to imitate to some extent the bequest practices of three characters: the protagonist in John Bunyan’s Pilgram’s Progress, Benjamin Franklin, and my first employer, Ernest Buffett.
Munger made extensive revisions to The Psychology of Human Misjudgment in Poor Charlie’s Almanack because he “thought he could do better at eighty-one than he did more than ten years earlier when he (1) knew less and was more harried by a crowded life and (2) was speaking from rough notes instead of revising transcripts.”
You can find a transcript of the talk here.