Tag: Charlie Munger

Bias from Disliking/Hating

(This is a follow-up to our post on the Bias from Liking/Loving, which you can find here.)

Think of a cat snarling and spitting, lashing with its tail and standing with its back curved. Her pulse is elevated, blood vessels constricted and muscles tense. This reaction may sound familiar, because everyone has experienced the same tensed-up feeling of rage at least once in their lives.

When rage is directed towards an external object, it becomes hate. Just as we learn to love certain things or people, we learn to hate others.

There are several cognitive processes that awaken the hate within us and most of them stem from our need for self-protection.

Reciprocation

We tend to dislike people who dislike us (and, true to Newton, with equal strength.) The more we perceive they hate us, the more we hate them.

Competition

A lot of hate comes from scarcity and competition. Whenever we compete for resources, our own mistakes can mean good fortune for others. In these cases, we affirm our own standing and preserve our self-esteem by blaming others.

Robert Cialdini explains that because of the competitive environment in American classrooms, school desegregation may increase the tension between children of different races instead of decreasing it. Imagine being a secondary school child:

If you knew the right answer and the teacher called on someone else, you probably hoped that he or she would make a mistake so that you would have a chance to display your knowledge. If you were called on and failed, or if you didn’t even raise your hand to compete, you probably envied and resented your classmates who knew the answer.

At first we are merely annoyed. But then as the situation fails to improve and our frustration grows, we are slowly drawn into false attributions and hate. We keep blaming and associating “the others” who are doing better with the loss and scarcity we are experiencing (or perceive we are experiencing). That is one way our emotional frustration boils into hate.

Us vs. Them

The ability to separate friends from enemies has been critical for our safety and survival. Because mistaking the two can be deadly, our mental processes have evolved to quickly spot potential threats and react accordingly. We are constantly feeding information about others into our “people information lexicon” that forms not only our view of individuals, whom we must decide how to act around, but entire classes of people, as we average out that information.

To shortcut our reactions, we classify narrowly and think in dichotomies: right or wrong, good or bad, heroes or villains. (The type of Grey Thinking we espouse is almost certainly unnatural, but, then again, so is a good golf swing.) Since most of us are merely average at everything we do, even superficial and small differences, such as race or religious affiliation, can become an important source of identification. We are, after all, creatures who seek to belong to groups above all else.

Seeing ourselves as part of a special, different and, in its own way, superior group, decreases our willingness to empathize with the other side. This works both ways – the hostility towards the others also increases the solidarity of the group. In extreme cases, we are so drawn towards the inside view that we create a strong picture of the enemy that has little to do with reality or our initial perceptions.

From Compassion to Hate

We think of ourselves as compassionate, empathetic and cooperative. So why do we learn to hate?

Part of the answer lies in the fact that we think of ourselves in a specific way. If we cannot reach a consensus, then the other side, which is in some way different from us, must necessarily be uncooperative for our assumptions about our own qualities to hold true.

Our inability to examine the situation from all sides and shake our beliefs, together with self-justifying behavior, can lead us to conclude that others are the problem. Such asymmetric views, amplified by strong perceived differences, often fuel hate.

What started off as odd or difficult to understand, has quickly turned into unholy.

If the situation is characterized by competition, we may also see ourselves as a victim. The others, who abuse our rights, take away our privileges or restrict our freedom are seen as bullies who deserve to be punished. We convince ourselves that we are doing good by doing harm to those who threaten to cross the line.

This is understandable. In critical times our survival indeed may depend on our ability to quickly spot and neutralize dangers. The cost of a false positive – mistaking a friend for a foe – is much lower than the potentially fatal false negative of mistaking our adversaries for innocent allies. As a result, it is safest to assume that anything we are not familiar with is dangerous by default. Natural selection, by its nature, “keeps what works,” and this tendency towards distrust of the unfamiliar probably survived in that way.

The Displays of Hate

Physical and psychological pain is very mobilizing. We despise foods that make us nauseous and people that have hurt us. Because we are scared to suffer, we end up either avoiding or destroying the “enemy”, which is why revenge can be pursued with such vengeance. In short, hate is a defense against enduring pain repeatedly.

There are several ways that the bias for disliking and hating display themselves to the outer world. The most obvious of them is war, which seems to have been more or less prevalent throughout the history of mankind.

This would lead us to think that war may well be unavoidable. Charlie Munger offers the more moderate opinion that while hatred and dislike cannot be avoided, the instances of war can be minimized by channeling our hate and fear into less destructive behaviors. (A good political system allows for dissent and disagreement without explosions of blood upheaval.)

Even with the spread of religion, and the advent of advanced civilization, modern war remains pretty savage. But we also get what we observe in present-day Switzerland and the United States, wherein the clever political arrangements of man “channel” the hatreds and dislikings of individuals and groups into nonlethal patterns including elections.

But these dislikings and hatreds that are arguably inherent to our nature never go away completely and transcend themselves into politics. Think of the dichotomies. There is the left versus the right wing, the nationalists versus the communists and libertarians vs. authoritarians. This might be the reason why there are maxims like: “Politics is the art of marshaling hatreds.

Finally, as we move away from politics, arguably the most sophisticated and civilized way of channeling hatred is litigation. Charlie Munger attributes the following words to Warren Buffett:

A major difference between rich and poor people is that the rich people can spend their lives suing their relatives.

While most of us reflect on our memories of growing up with our siblings with fondness, there are cases where the competition for shared attention or resources breeds hatred. If the siblings can afford it, they will sometimes litigate endlessly to lay claims over their parents’ property or attention.

Under the Influence of Bias

There are several ways that bias from hating can interfere with our normal judgement and lead to suboptimal decisions.

Ignoring Virtues of The Other Side

Michael Faraday was once asked after a lecture whether he implied that a hated academic rival was always wrong. His reply was short and firm “He’s not that consistent.” Faraday must have recognized the bias from hating and corrected for it with the witty comment.

What we should recognize here is that no situation is ever black or white. We all have our virtues and we all have our weaknesses. However, when possessed by the strong emotions of hate, our perceptions can be distorted to the extent that we fail to recognize any good in the opponent at all. This is driven by consistency bias, which motivates us to form a coherent (“she is all-round bad”) opinion of ourselves and others.

Association Fueled Hate

The principle of association goes that the nature of the news tends to infect the teller. This means that the worse the experience, the worse the impression of anything related to it.

Association is why we blame the messenger who tells us something that we don’t want to hear even when they didn’t cause the bad news. (Of course, this creates an incentive not to speak the truth and avoid giving bad news.)

A classic example is an unfortunate and confused weatherman, who receives hate mail, whenever it rains. One went so far as to seek advice from the Arizona State professor of psychology, Robert Cialdini, whose work we have discussed before.

Cialdini explained to him that in light of the destinies of other messengers, he was born lucky. Rain might ruin someone’s holiday plans, but it will rarely change the destiny of a nation, which was the case of Persian war messengers. Delivering good news meant a feast, whereas delivering bad news resulted in their death.

The weatherman left Cialdini’s office with a sense of privilege and relief.

“Doc,” he said on his way out, “I feel a lot better about my job now. I mean, I’m in Phoenix where the sun shines 300 days a year, right? Thank God I don’t do the weather in Buffalo.”

Fact Distortion

Under the influence of liking or disliking bias, we tend to fill gaps in our knowledge by building our conclusions on assumptions, which are based on very little evidence.

Imagine you meet a woman at a party and find her to be a self-centered, unpleasant conversation partner. Now her name comes up as someone who could be asked to contribute to a charity. How likely do you feel it is that she will give to the charity?

In reality, you have no useful knowledge, because there is little to nothing that should make you believe that people who are self-centered are not also generous contributors to charity. The two are unrelated, yet because of the well-known fundamental attribution error, we often assume one is correlated to the other.

By association, you are likely to believe that this woman is not likely to be generous towards charities despite lack of any evidence. And because now you also believe she is stingy and ungenerous, you probably dislike her even more.

This is just an innocent example, but the larger effects of such distortions can be so extreme that they lead to a major miscognition. Each side literally believes that every single bad attribute or crime is attributable to the opponent.

Charlie Munger explains this with a relatively recent example:

When the World Trade Center was destroyed, many Pakistanis immediately concluded that the Hindus did it, while many Muslims concluded that the Jews did it. Such factual distortions often make mediation between opponents locked in hatred either difficult or impossible. Mediations between Israelis and Palestinians are difficult because facts in one side’s history overlap very little with facts from the other side’s. These distortions and the overarching mistrust might be why some conflicts seem to never end.

Avoiding Being Hated

To varying degrees, we value acceptance and affirmation from others. Very few of us wake up wanting to be disliked or rejected. Social approval, at its heart the cause of social influence, shapes behavior and contributes to conformity. Francois VI, Duc de La Rochefoucauld wrote: “We only confess our little faults to persuade people that we have no big ones.”

Remember the old adage, “The nail that sticks out gets hammered down.” This is why we don’t openly speak the truth or question people, we don’t want to be the nail.

How do we resolve hate?

It is only normal that we can find more common ground with some people than with others. But are we really destined to fall into the traps of hate or is there a way to take hold of these biases?

That’s a question worth over a hundred million lives. There are ways that psychologists think that we can minimize prejudice against others.

Firstly, we can engage with others in sustained close contact to breed our familiarity. The contact must not only be prolonged, but also positive and cooperative in nature – either working towards a common cause or against a common enemy.

Secondly, we also reduce prejudice by attaining equal status in all aspects, including education, income and legal rights. This effect is further reinforced, when equality is supported not only “on paper”, but also ingrained within broader social norms.

And finally the obvious – we should practice awareness of our own emotions and ability to hold back on the temptations to dismiss others. Whenever confronted with strong feelings it might simply be best to sit back, breathe and do our best to eliminate the distorted thinking.

 

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Want more? Check out the bias of liking/loving, or check out a whole bunch of mental models.

Bias from Liking/Loving: Why We Comply With Those We Love

The decisions that we make are rarely impartial. Most of us already know that we prefer to take advice from people that we like. We also tend to more easily agree with opinions formed by people we like. The tendency to judge in favor of people and symbols we like is called the bias from liking or loving.

We are more likely to ignore faults and comply with wishes of our friends or lovers rather than random strangers. We favor people, products, and actions associated with our favorite celebrities. Sometimes we even distort facts to facilitate love. The influence that our friends, parents, lovers, and idols exert on us can be enormous.

In general, this is a good thing, a bias that adds on balance rather than subtracts. It helps us form successful relationships, it helps us fall in love (and stay in love), it helps us form attachments with others that give us great happiness.

But we do want to be aware of where this tendency leads us awry.

For example, some people and companies have learned to use this influence to their advantage.

In his bestseller on social psychology Influence, Robert Cialdini tells a story about the successful strategy of Tupperware, which at the time reported sales of over $2.5 million a day.

As many of us know, the company for a long time sold its kitchenware at parties thrown by friends of the potential customers. At each party, there was a Tupperware representative taking orders, but the hostess, the friend of the invitees, received a commission.

These potential customers are not blind to the incentives and social pressures involved. Some of them don’t mind it, others do, but all admit a certain degree of helplessness in their situation. Cialdini recalls a conversation with one of the frustrated guests:

It’s gotten to the point now where I hate to be invited to Tupperware parties. I’ve got all the containers I need; and if I wanted any more, I could buy another brand cheaper in the store. But when a friend calls up, I feel like I have to go. And when I get there, I feel like I have to buy something. What can I do? It’s for one of my friends.

We are more likely to buy in a familiar, friendly setting and under the obligation of friendship rather than from an unfamiliar store or a catalog. We simply find it much harder to say “no” or disagree when it’s a friend. The possibility of ruining the friendship, or seeing our image altered in the eyes of someone we like, is a powerful motivator to comply.

The Tupperware example is a true “lollapalooza” in favor of manipulating people into buying things. Besides the liking tendency, there are several other factors at play: commitment/consistency bias, a bias from stress, an influence from authority, a reciprocation effect, and some direct incentives and disincentives, at least! (Lollapaloozas, something we’ll talk more about in the future, are when several powerful forces combine to create a non-linear outcome. A good way to think of this conceptually for now is that 1+1=3.)

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The liking tendency is so strong that it stretches beyond close friendships. It turns out we are also more likely to act in favor of certain types of strangers.

Can you recall meeting someone with whom you hit it off instantly, where it almost seemed like you’d known them for years after a 20-minute conversation? Developing such an instant bond with a stranger may seem like a mythical process, but it rarely is. There are several tactics that can be used to make us like something, or someone, more than we otherwise would.

Appearance and the Halo Effect

We all like engaging in activities with beautiful people. This is part of an automatic bias that falls into a category called The Halo Effect.

The Halo Effect occurs when a specific, positive characteristic determines the way a person is viewed by others on other, unrelated traits. In the case of beauty, it’s been shown that we automatically assign favorable yet unrelated traits such as talent, kindness, honesty, and intelligence, with those we find physically attractive.

For the most part, this attribution happens unnoticed. For example, attractive candidates received more than twice as many votes as unattractive candidates in the 1974 Canadian federal elections. Despite the ample evidence of predisposition towards handsome politicians, follow-up research demonstrated that nearly three-quarters of Canadians surveyed strongly denied the influence of physical appearance in their voting decisions.

The power of the Halo Effect is that it’s mostly happening beneath the level of consciousness.

Similar forces are at play when it comes to hiring decisions and pay. While employers deny that they are strongly influenced by looks, studies show otherwise.

In one study evaluating hiring decisions based on simulated interviews, the applicants’ grooming played a greater role in the outcome than job qualifications. Partly, this has a rational basis. We might assume that someone who shows up without the proper “look” for the job may be deficient in other areas. If they couldn’t shave and put a tie on, how are we to expect them to perform with customers? Partly, though, it’s happening subconsciously. Even if we never consciously say to ourselves that “Better grooming = better employee”, we tend to act that way in our hiring.

These effects go even beyond the hiring phase — attractive individuals in the US and Canada have been estimated to earn an average of 12-14 percent more than their unattractive coworkers. Whether this is due to liking bias or perhaps the increased self-confidence that comes from above-average looks is hard to say.

Appearance is not the only quality that may skew our perceptions in favor of someone. The next one on the list is similarity.

Similarity

We like people who resemble us. Whether it’s appearance, opinions, lifestyle or background, we tend to favor people who on some dimension are most similar to ourselves.

A great example of similarity bias is the case of dress. Have you ever been at an event where you felt out of place because you were either overdressed or underdressed? The uneasy feelings are not caused only by your imagination. Numerous studies suggest that we are more likely to do favors, such as giving a dime or signing a petition, to someone who looks like us.

Similarity bias can extend to even such ambiguous traits as interests and background. Many salesmen are trained to look for similarities to produce a favorable and trustworthy image in the eyes of their potential customers.

In Influence: The Psychology of Persuasion, Robert Cialdini explains:

If there is camping gear in the trunk, the salespeople might mention, later on, how they love to get away from the city whenever they can; if there are golf balls on the back seat, they might remark that they hope the rain will hold off until they can play the eighteen holes they scheduled for later in the day; if they notice that the car was purchased out of state, they might ask where a customer is from and report—with surprise—that they (or their spouse) were born there, too.

These are just a few of many examples which can be surprisingly effective in producing a sweet feeling of familiarity. Multiple studies illustrate the same pattern. We decide to fill out surveys from people with similar names, buy insurance from agents of similar age and smoking habits, and even decide that those who share our political views deserve their medical treatment sooner than the rest.

There is just one takeaway: even if the similarities are terribly superficial, we still may end up liking the other person more than we should.

“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.”

— Charlie Munger

Praise and Compliments

We are all phenomenal suckers for flattery. These are not my words, but words of Robert Cialdini and they ring a bell. Perhaps, more than anything else in this world we love to be loved and, consequently, we love those that love us.

Consider the technique of Joe Girard, who has been continuously called the world’s “greatest car salesman” and has made it to the Guinness World Record book.

Each month Joe prints and sends over 13,000 holiday cards to his former customers. While the theme of the card varies depending on the season and celebration, the printed message always remains the same. On each of those cards Girard prints three simple words ”I like you” and his name. He explains:

“There’s nothing else on the card, nothin’ but my name. I’m just telling ’em that I like ’em.” “I like you.” It came in the mail every year, 12 times a year, like clockwork.

Joe understood a simple fact about humans – we love to be loved.

As numerous experiments show, regardless of whether the praise is deserved or not, we cannot help but develop warm feelings to those that provide it. Our reaction can be so automatic, that we develop liking even when the attempt to win our favor is an obvious one, as in the case of Joe.

Familiarity

In addition to liking those that like us and look like us, we also tend to like those who we know. That’s why repeated exposure can be a powerful tool in establishing liking.

There is a fun experiment you can do to understand the power of familiarity.

Take a picture of yourself and create a mirror image in one of the editing tools. Now with the two pictures at hand decide which one – the real or the mirror image you like better. Show the two pictures to a friend and ask her to choose the better one as well.

If you and your friend are like the group on whom this trick was tried, you should notice something odd. Your friend will prefer the true print, whereas you will think you look better in the mirror image. This is because you both prefer the faces you are used to. Your friend always sees you from her perspective, whereas you have learned to recognize and love your mirror image.

The effect, of course, extends beyond faces into places, names, and even ideas.

For example, in elections, we might prefer candidates whose names sound more familiar. The Ohio Attorney-General post was claimed by a man who, shortly before his candidacy, changed his last name to Brown – a family name of Ohio political tradition. Apart from his surname, there was little to nothing that separated him from other equally if not more capable candidates.

How could such a thing happen? The answer lies partly in the unconscious way that familiarity affects our liking. Often we don’t realize that our attitude toward something has been influenced by the number of times we have been exposed to it in the past.

Loving by Association and Referral

Charisma or attraction are not prerequisites for liking — a mere association with someone you like or trust can be enough.

The bias from association shows itself in many other domains and is especially strong when we associate with the person we like the most — ourselves. For example, the relationship between a sports fan and his local team can be highly personal even though the association is often based only on shared location. For the fan, however, the team is an important part of his self-identity. If the team or athlete wins, he wins as well, which is why sports can be so emotional. The most dedicated fans are ready to get into fights, burn cars or even kill to defend the honor of their team. Such associated sense of pride and achievement is as true for celebrities as it is for sports.

When Kevin Costner delivered his acceptance speech after winning the best picture award for Dances With Wolves, he said:

“While it may not be as important as the rest of the world situation, it will always be important to us. My family will never forget what happened here; my Native American brothers and sisters, especially the Lakota Sioux, will never forget, and the people I went to high school with will never forget.”

The interesting part of his words is the notion that his high school peers will remember, which is probably true. His former classmates are likely to tell people that they went to school with Costner, even though they themselves had no connection with the success of the movie.

Costner’s words illustrate that even a trivial association with success may reap benefits and breed confidence.

Who else do we like besides ourselves, celebrities and our sports teams?

People we’ve met through those who are close to us – our neighbors, friends, and family. It is common sense that a referral from someone we trust is enough to trigger mild liking and favorable initial opinions.

There are a number of companies that use friend referral as a sales tactic. Network providers, insurers, and other subscription services offer a number of benefits for those of us who give away our friends’ contact details.

The success of this method rests on the implicit idea that turning down the sales rep who says “your friend Jenny/Allan suggested I call you” feels nearly as bad as turning down Jenny or Allan themselves. This tactic, when well executed, leads to a never-ending chain of new customers.

Can We Avoid Liking?

Perhaps the right question to ask here is not “how can we avoid the bias from liking”, but when should we?

Someone who is conditioned to like the right people and pick their idols carefully can greatly benefit from these biases. Charlie Munger recalls that both he and Warren Buffett benefitted from liking admirable persons:

One common, beneficial example for us both was Warren’s uncle, Fred Buffett, who cheerfully did the endless grocery-store work that Warren and I ended up admiring from a safe distance. Even now, after I have known so many other people, I doubt if it is possible to be a nicer man than Fred Buffett was, and he changed me for the better.

The keywords here are “from a safe distance”.

If dealing with salesmen and others who clearly benefit from your liking, it might be a good idea to check whether you have been influenced. In these unclear cases, Cialdini advises us to focus on our feelings rather than the other person’s actions that may produce liking. Ask yourself how much of what you feel is due to liking versus the actual facts of the situation.

The time to call out the defense is when we feel ourselves liking the practitioner more than we should under the circumstances, when we feel manipulated.

Once we have recognized that we like the requester more than we would expect under the given circumstances, we should take a step back and question ourselves. Are you doing the deal because you like someone or is it because it is indeed the best option out there?

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Still Interested? Follow this up with the bias from disliking and hating.

Sol Price on Becoming Your Customer’s Best Friend

Sol Price is a legend in the retail business. Price founded one of the first discount retailers, FedMart, in the 1950s, and then later the pioneer warehouse club Price Club, which he later sold to Costco, a business started by his former protege Jim Sinegal. Price’s innovations would go on to change the retail landscape dramatically and permanently. Costco now does $120 billion in sales and Sam’s Club, owned by Wal-Mart, does about $60 billion. Adding in other smaller operations, warehouse retailing is at least a $200 billion business in the United States alone.

Price innovated in several ways: Membership fees, way fewer product SKUs in stock, much larger sizes, extremely low profit margins bordering on break-even, low employee turnover and a lean labor model. But these were all mere symptoms of his overall stance: Price’s fundamental innovation was his approach to the customer relationship.

Whereas most retailers saw customers as adversaries, bodies to be sold to, Price saw the world differently. He felt he was on the customers’ side. He felt his job as a retailer was to become the customer’s greatest friend and advocate, and in return, the customer would pledge his loyalty back. He understood that trust given is trust earned.

Sol Price Price Club

The idea was very simple: See the world through the eyes of the customer. His son Robert, influential in his own right, describes Price’s unusual attitude (which is still uncommon) in a book called Sol Price: Retail Revolutionary & Social Innovator:

Sol’s experience as an attorney representing clients, and his own moral code, became a foundational feature of the FedMart business. Sol described his business approach as “the professional fiduciary relationship between us (the retailer) and the member (the customer). We felt we were representing the customer. You had a duty to be very, very honest and fair with them and so we avoided sales and advertising. We have in effect said that the best advertising is by our members…the unsolicited testimonial of the satisfied customer.”

This fiduciary relationship with the customer was similar to the Golden Rule; the way Sol put it—if you want to be successful in retail, just put yourself in the place of a cranky, demanding customer. In other words, see your business through the eyes of the customer.

Clearly, Sol Price followed Tussman’s dictum to understand the world and act accordingly, and understood the value of a win-win relationship. The success of Costco in his wake, and the continued loyalty of its customers in the face of a rapidly changing retail landscape, is a testimony to the value of his attitude.

Price had a few simple tenets in running FedMart and Price Club, which Sinegal would later adopt at Costco:

  1. Provide the best possible value to the customers, excellent quality products at the lowest possible prices.
  2. Pay good wages and provide good benefits, including health insurance to employees.
  3. Maintain honest business practices.
  4. Make money for investors.

Regarding the last point, it was clearly important to Price to make money, and if you look at Costco today, the model is obviously profitable. But it’s not that profitable. Costco makes solid returns but not incredible ones. And that is by choice.

Price — and Sinegal by extension — wanted a win-win relationship whereby he made his investors a reasonable return on their capital and the customer got a better deal than they could find elsewhere, while employees were paid well enough and treated well enough that they wouldn’t want to leave. In his words, “If you recognize you’re really a fiduciary for the customer, you shouldn’t make too much money.” This model has been tough to beat.

Price was so hardcore about his fairness philosophy that he wouldn’t even engage in loss-leader pricing, which is common in retail. Have you ever found yourself saying How can they make any money at this price? Well, they may not be — products are frequently priced below cost to induce you to buy other products at a more inflated profit margin. But Price wouldn’t do this: It meant he was selling some portion of his goods at inflated prices to make up for the loss leaders, and that he would not abide.

His customer advocacy went so far that if Price’s competitors were selling a competing product below cost, Price did one of the most unusual things I’ve ever heard: He put up signs telling his customers to go shop there.

In this way and many others, the life of Sol Price reinforces the truth of Munger’s philosophy for living a more effective life: “Take a simple idea, and take it seriously.”

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Still Interested? Check out the book in its entirety.

Eager to Be Wrong

“You know what Kipling said? Treat those two impostors just the same — success and failure. Of course, there’s going to be some failure in making the correct decisions. Nobody bats a thousand. I think it’s important to review your past stupidities so you are less likely to repeat them, but I’m not gnashing my teeth over it or suffering or enduring it. I regard it as perfectly normal to fail and make bad decisions. I think the tragedy in life is to be so timid that you don’t play hard enough so you have some reverses.”
— Charlie Munger

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When was the last time you said to yourself I hope I’m wrong and really meant it?

Have you ever really meant it?

Here’s the thing: In our search for truth we must realize, thinking along two tracks, that we’re frequently led to wrong solutions by the workings of our natural apparatus. Uncertainty is a very mentally demanding, and in a certain way, physically demanding process. The brain uses a lot of energy when it has to process conflicting information. To show yourself, try reading up on something contentious like the abortion debate, but with a completely open mind to either side (if you can). Pay attention as your brain starts twisting itself into a very uncomfortable state while you explore completely opposing sides of an argument.

This mental pain is called cognitive dissonance and it’s really not that much fun. Charlie Munger calls the process of resolving this dissonance doubt avoidance tendency – the tendency to resolve conflicting information as quickly as possible to return to physical and mental comfort. To get back to your happy zone.

Combine this tendency to resolve doubt with the well-known first conclusion bias (something Francis Bacon knew about long ago), and the logical conclusion is that we land on a lot of wrong answers and stay there because it’s easier.

Let that sink in. We don’t stay there because we’re correct, but because it’s physically easier. It’s a form of laziness.

Don’t believe me? Spend a single day asking yourself this simple question: Do I know this for sure, or have I simply landed on a comfortable spot?

You’ll be surprised how many things you do and believe just because it’s easy. You might not even know how you landed there. Don’t feel bad about it — it’s as natural as breathing. You were wired that way at birth.

But there is a way to attack this problem.

Munger has a dictum that he won’t allow himself to hold an opinion unless he knows the other side of the argument better than that side does. Such an unforgiving approach means that he’s not often wrong. (It sometimes takes many years to show, but posterity has rarely shown him to be way off.) It’s a tough, wise, and correct solution.

It’s still hard though, and doesn’t solve the energy expenditure problem. What can we tell ourselves to encourage ourselves to do that kind of work? The answer would be well-known to Darwin: Train yourself to be eager to be wrong.

Right to be Wrong

The advice isn’t simply to be open to being wrong, which you’ve probably been told to do your whole life. That’s nice, and correct in theory, but frequently turns into empty words on a page. Simply being open to being wrong allows you to keep the window cracked when confronted with disconfirming evidence — to say Well, I was open to it! and keep on with your old conclusion.

Eagerness implies something more. Eager implies that you actively hope there is real, true, disconfirming information proving you wrong. It implies you’d be more than glad to find it. It implies that you might even go looking for it. And most importantly, it implies that when you do find yourself in error, you don’t need to feel bad about it. You feel great about it! Imagine how much of the world this unlocks for you.

Why be so eager to prove yourself wrong? Well, do you want to be comfortable or find the truth? Do you want to say you understand the world or do you want to actually understand it? If you’re a truth seeker, you want reality the way it is, so you can live in harmony with it.

Feynman wanted reality. Darwin wanted reality. Einstein wanted reality. Even when they didn’t like it. The way to stand on the shoulders of giants is to start the day by telling yourself I can’t wait to correct my bad ideas, because then I’ll be one step closer to reality. 

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Post-script: Make sure you apply this advice to things that matter. As stated above, resolving uncertainty takes great energy. Don’t waste that energy on deciding whether Nike or Reebok sneakers are better. They’re both fine. Pick the ones that feel comfortable and move on. Save your deep introspection for the stuff that matters.

Seneca on Letting the Eminent Dead Guide You

“One who can so revere another, will soon himself be worthy of reverence.”

— Seneca

There’s a core part of Charlie Munger’s operating system for life that we adhere to: Learn deeply from the eminent dead. Bathe in the wisdom of great people who lived before you. He calls it a form of love:

A second idea that I got very early was that there is no love that’s so right as admiration-based love, and that love should include the instructive dead. Somehow, I got that idea and I lived with it all my life; and it’s been very, very useful to me.

Munger has commented that he’ll frequently be in a room with live people while mentally conversing with the dead. While you might not want to pick up on that particular habit unless you’re a 90-year-old billionaire (and perhaps not even then), the point still stands.

This advice is, of course, not new. Munger echoes the Stoic philosopher Seneca, who echoes Epicurus in recommending his pupil Lucilius learn from the best as well. Only Seneca takes it a step further. In his classic Letters Seneca instructs Lucilius not only to study the greats, but to keep them in front of him at all times, as a way to strengthen his nature. To let the eminent dead watch over his actions.

Cherish some man of high character, and keep him ever before your eyes, living as if he were watching you, and ordering all your actions as if he beheld them.” Such, my dear Lucilius, is the counsel of Epicurus; he has quite properly given us a guardian and an attendant. We can get rid of most sins, if we have a witness who stands near us when we are likely to go wrong. The soul should have someone whom it can respect, – one by whose authority it may make even its inner shrine more hallowed. Happy is the man who can make others better, not merely when he is in their company, but even when he is in their thoughts! And happy also is he who can so revere a man as to calm and regulate himself by calling him to mind! One who can so revere another, will soon be himself worthy of reverence.

Choose therefore a Cato; or, if Cato seems too severe a model, choose some Laelius, a gentler spirit. Choose a master whose life, conversation, and soul-expressing face have satisfied you; picture him always to yourself as your protector or your pattern. For we must indeed have someone according to whom we may regulate our characters; you can never straighten that which is crooked unless you use a ruler.

Munger himself seems to have done this very thing with Ben Franklin, using him as a model of honesty, thriftiness, self-improvement, business savvy, and wit. Heck, the book of his speeches was titled Poor Charlie’s Almanack, in homage to Franklin’s Poor Richard’s Almanack.

One might ask what use there is living in the shadow of others: Why not forge your own path? We can use a bit of simple algebra to solve this one. If (A) is [Direct life experience] and (B) is [Learning through the experience of others], and both have a positive value, then is A+B not greater than A alone? How could it be otherwise?

Seneca address this well in the same letter to Lucilius:

“Epicurus,” you reply, “uttered these words; what are you doing with another’s property?” Any truth, I maintain, is my own property. I shall continue to heap quotations from Epicurus upon you, so that all persons who swear by the words of another, and put a value upon the speaker and not upon the thing spoken, may understand that the best ideas are common property.

His final words echo our mantra: Don’t be ashamed to pay heed to the best of what other people have already figured out. We don’t need to think up all the wisdom of the world ourselves. Master the best of what the world has figured out.

Still Interested? Check out the mental models approach, or check out some of our posts on Seneca.

The Munger Operating System: How to Live a Life That Really Works

In 2007, Charlie Munger gave the commencement address at USC Law School, opening his speech by saying, “Well, no doubt many of you are wondering why the speaker is so old. Well, the answer is obvious: He hasn’t died yet.”

Fortunately for us, Munger has kept on ticking. The commencement speech is an excellent response to the Big Question: How do we live a life that really works? It has so many of Munger’s core ideas that we think the speech represents the Munger Operating System for life.

Munger Operating System

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To get what you want, deserve what you want. Trust, success, and admiration are earned. 

It’s such a simple idea. It’s the golden rule so to speak: You want to deliver to the world what you would buy if you were on the other end. There is no ethos, in my opinion, that is better for any lawyer or any other person to have. By and large the people who have this ethos win in life and they don’t win just money, not just honors. They win the respect, the deserved trust of the people they deal with, and there is huge pleasure in life to be obtained from getting deserved trust.

Learn to love and admire the right people, live or dead.

A second idea that I got very early was that there is no love that’s so right as admiration-based love, and that love should include the instructive dead. Somehow, I got that idea and I lived with it all my life; and it’s been very, very useful to me.

Acquiring wisdom is a moral duty as well as a practical one. 

And there’s a corollary to that proposition which is very important. It means that you’re hooked for lifetime learning, and without lifetime learning you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you’re going to learn after you leave here…if civilization can progress only when it invents the method of invention, you can progress only when you learn the method of learning.

Learn to fluency the big multidisciplinary ideas of the world and use them regularly. 

What I noted since the really big ideas carry 95% of the freight, it wasn’t at all hard for me to pick up all the big ideas from all the big disciplines and make them a standard part of my mental routines. Once you have the ideas, of course, they are no good if you don’t practice — if you don’t practice you lose it.

So I went through life constantly practicing this model of the multidisciplinary approach. Well, I can’t tell you what that’s done for me. It’s made life more fun, it’s made me more constructive, it’s made me more helpful to others, it’s made me enormously rich, you name it, that attitude really helps.

Now there are dangers there, because it works so well, that if you do it, you will frequently find you are sitting in the presence of some other expert, maybe even an expert that’s superior to you, supervising you. And you will know more than he does about his own specialty, a lot more. You will see the correct answer when he’s missed it.

[…]

It doesn’t help you just to know them enough just so you can give them back on an exam and get an A. You have to learn these things in such a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life.

Learn to think through problems backwards as well as forward.

The way complex adaptive systems work and the way mental constructs work, problems frequently get easier and I would even say usually are easier to solve if you turn around in reverse.

In other words if you want to help India, the question you should ask is not “how can I help India?”, you think “what’s doing the worst damage in India? What would automatically do the worst damage and how do I avoid it?” You’d think they are logically the same thing, but they’re not. Those of you who have mastered algebra know that inversion frequently will solve problems which nothing else will solve. And in life, unless you’re more gifted than Einstein, inversion will help you solve problems that you can’t solve in other ways.

Be reliable. Unreliability can cancel out the other virtues.

If you’re unreliable it doesn’t matter what your virtues are, you’re going to crater immediately. So doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

Avoid intense ideologies. Always consider the other side as carefully as your own.

Another thing I think should be avoided is extremely intense ideology, because it cabbages up one’s mind. You’ve seen that. You see a lot of it on TV, you know preachers for instance, they’ve all got different ideas about theology and a lot of them have minds that are made of cabbage.

But that can happen with political ideology. And if you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very careful with this ideology. It’s a big danger.

In my mind I have a little example I use whenever I think about ideology, and it’s these Scandinavian canoeists who succeeded in taming all the rapids of Scandinavia and they thought they would tackle the whirlpools in the Grand Rapids here in the United States. The death rate was 100%. A big whirlpool is not something you want to go into and I think the same is true about a really deep ideology.

I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another. And that is I say “I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it. I think that only when I reach that stage am I qualified to speak.” Now you can say that’s too much of an iron discipline..it’s not too much of an iron discipline. It’s not even that hard to do.

Get rid of self-serving bias, envy, resentment, and self-pity. 

Generally speaking, envy, resentment, revenge and self pity are disastrous modes of thought. Self-pity gets pretty close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity.

I have a friend who carried a big stack of index cards about this thick, and when somebody would make a comment that reflected self pity, he would take out one of the cards, take the top one off the stack and hand it to the person, and the card said, “Your story has touched my heart, never have I heard of anyone with as many misfortunes as you”. Well, you can say that’s waggery, but I suggest that every time you find you’re drifting into self pity, I don’t care what the cause — your child could be dying of cancer — self-pity is not going to improve the situation. Just give yourself one of those cards.

It’s a ridiculous way to behave, and when you avoid it you get a great advantage over everybody else, almost everybody else, because self-pity is a standard condition and yet you can train yourself out of it.

And of course self-serving bias, you want to get that out of yourself; thinking that what’s good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on the subconscious tendency to serve one’s self.

At the same time, allow for the self-serving bias in others who haven’t removed it.

You also have to allow for the self serving bias of everybody else, because most people are not going to remove it all that successfully, the human condition being what it is. If you don’t allow for self serving bias in your conduct, again you’re a fool.

I watched the brilliant Harvard Law School trained general counsel of Salomon lose his career, and what he did was when the CEO became aware that some underling had done something wrong, the general counsel said, “Gee, we don’t have any legal duty to report this but I think it’s what we should do it’s our moral duty.”

Of course, the general counsel was totally correct but of course it didn’t work; it was a very unpleasant thing for the CEO to do and he put it off and put if off and of course everything eroded into a major scandal and down went the CEO and the general counsel with him.

The correct answer in situations like that was given by Ben Franklin, he said, “If you want to persuade, appeal to interest not to reason.” The self serving bias is so extreme. If the general counsel had said, “Look this is going to erupt, it’s something that will destroy you, take away your money, take away your status…it’s a perfect disaster,” it would have worked!

Avoid being part of a system with perverse incentives.

Incentives are too powerful a controller of human cognition and human behavior, and one of the things you are going to find in some modern law firms is billable hour quotas. I could not have lived under a billable hour quota of 2,400 hours a year. That would have caused serious problems for me — I wouldn’t have done it and I don’t have a solution for you for that. You’ll have to figure it out for yourself but it’s a significant problem.

Work with and under people you admire, and avoid the inverse when at all possible.

And that requires some talent. The way I solved that is, I figured out the people I did admire and I maneuvered cleverly without criticizing anybody, so I was working entirely under people I admired. And a lot of law firms will permit that if you’re shrewd enough to work it out. And your outcome in life will be way more satisfactory and way better if you work under people you really admire. The alternative is not a good idea.

Learn to maintain your objectivity, especially when it’s hardest.

Well we all remember that Darwin paid special attention to disconfirming evidence particularly when it disconfirmed something he believed and loved. Well, objectivity maintenance routines are totally required in life if you’re going to be a correct thinker. And there we’re talking about Darwin’s attitude, his special attention to disconfirming evidence, and also to checklist routines. Checklist routines avoid a lot of errors. You should have all this elementary wisdom and then you should go through and have a checklist in order to use it. There is no other procedure that will work as well.

Concentrate experience and power into the hands of the right people – the wise learning machines. 

I think the game of life in many respects is getting a lot of practice into the hands of the people that have the most aptitude to learn and the most tendency to be learning machines. And if you want the very highest reaches of human civilization that’s where you have to go.

You do not want to choose a brain surgeon for your child among fifty applicants all of them just take turns during the procedure. You don’t want your airplanes designed that way. You don’t want your Berkshire Hathaways run that way. You want to get the power into the right people.

You’ll be most successful where you’re most intensely interested.

Another thing that I found is an intense interest of the subject is indispensable if you are really going to excel. I could force myself to be fairly good in a lot of things, but I couldn’t be really good in anything where I didn’t have an intense interest. So to some extent, you’re going to have to follow me. If at all feasible you want to drift into doing something in which you really have a natural interest.

Learn the all-important concept of assiduity: Sit down and do it until it’s done.

Two partners that I chose for one little phase of my life had the following rule: They created a little design/build construction team, and they sat down and said, two-man partnership, divide everything equally, here’s the rule; “Whenever we’re behind in our commitments to other people, we will both work 14 hours a day until we’re caught up.”

Well, needless to say, that firm didn’t fail. The people died rich. It’s such a simple idea.

Use setbacks in life as an opportunity to become a bigger and better person. Don’t wallow.

Another thing of course is life will have terrible blows, horrible blows, unfair blows, doesn’t matter. And some people recover and others don’t. And there I think the attitude of Epictetus is the best. He thought that every mischance in life was an opportunity to behave well, every mischance in life was an opportunity to learn something, and your duty was not to be submerged in self-pity but to utilize the terrible blow in a constructive fashion. That is a very good idea.

The highest reach of civilization is a seamless system of trust among all parties concerned. 

The last idea that I want to give you as you go out into a profession that frequently puts a lot of procedure and a lot of precautions and a lot of mumbo jumbo into what it does, this is not the highest form which civilization can reach. The highest form which civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic.

If a bunch of lawyers were to introduce a lot of process, the patients would all die. So never forget when you’re a lawyer that you may be rewarded for selling this stuff but you don’t have to buy it. In your own life what you want is a seamless web of deserved trust. And if your proposed marriage contract has 47 pages, my suggestion is do not enter.


Still Interested?
Check our our Munger compendium.