Tanya tells us what causes human misjudgements, according to Charlie Munger, exclusively for Different Truths.
Charlie Munger, the famous investor, and partner of Warren Buffet stated the following reasons for human misjudgement.
Psychological denial: This is the situation we find people or ourselves in quite a lot. I think we need to learn how to embrace reality and be open minded to outside thoughts/inputs.
Consistency and commitment tendency: This situation is more of making really strong barriers. Inability to accept new theories or what other religion preaches explains this situation. Or this could involve supporting someone with whom you have a close association even though they are wrong. Truth is the foundation of anything lasting.
Pavlovian association: He conducted an experiment, and the dogs salivated whenever he rang the bell. It’s an extremely powerful psychological force in the daily life. Almost 3/4th of advertising works on this principle. A product which has a larger market share will sell more than the product which has its price reduced than its competitors.
Reciprocation tendency: A situation where you or a group is presented with a situation or an offer. And after denial by you, you are presented with a counter, which reduces the compliance rate to half or so. The chances of you agreeing are really high.
Social proof: The thing with humans is we follow majority, very few have the courage to do what is right and eventually become leaders. In an accident we are more certain to find people watching or passing by cause Social proof – no one is helping. The majority does not win in this case. Please learn to be rational and courageous.
Contrast-caused distortion: The sensation apparatus of man is over-influenced by contrast. A real estate broker can act as a cognition manipulator by taking you to the highly overpriced house first and eventually to a moderately overpriced one. With which you are most likely to settle with.
Over-influence by authority: A situation every human will face in their lifetime. That’s why it is so important to be successful and be your own boss? That’s a long way to go but you will be there. This is the reason why Hitler was successful with Nazi formation seems idiotic, how anyone could be influenced to such extremes. But that’s how vulnerable our mind can be and lead to disastrous situations.
Deprival super-reaction syndrome: Removal of something you almost possess but don’t really possess, which leads to a super-reaction since we reciprocate animosity and not happiness.
Envy/jealousy: It’s not greed which drives this world but envy.
Chemical dependency: It leads to moral breakdown. Or let’s just say any addiction as a matter of fact. Toxic! Excess of anything is just too bad, need to balance it out. Space is needed for growth.
Misgambling compulsion: Ever felt you were so close? To win a lottery, casino game, or picking a card? Don’t fall for the gambler’s fallacy. Past events never affect the outcome of an independent event. These things are designed because they know how humans think unless you have an algorithm figured out. And no investment is not gambling.
Liking distortion: We tend to or prefer to accept/take information from someone we like, one’s own kind, or someone with similar idea structure. And to be especially susceptible to being misled by someone you like. They also tend to believe that their idea structure will be put to use in the very situation and the problems they deal with are the biggest and the most important ones.
Stress-induced mental changes: Pavlov’s dogs were submerged in water during a flood. The dogs went through a lot of stress, peak to be precise. He observed a total reversal of the conditioned personality.
Other normal limitations of sensation, memory, cognition, and knowledge should also be taken into account. Last but not the least, the thought system in this list has great value and should be widely recognised.
Photos from the Internet
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Tanya Singh is a computer science graduate who draws inspiration from things around her. She believes that words have immense power to influence people and hopes to be a positive influence. She is also fond of graphic designing and gardening, anything which invokes the creative soul.