Psychology Flashcards
(52 cards)
What do people believe?
What they want to believe (and what suits them)
Until the truth is too painful to ignore
Do people like thinking about bad things happening?
No, people hate thinking about bad things happening, so they underestimate their likelihood or disregard the possibility
How do people like to value things?
Based on an authority, which tells them how to value things, which they choose based on perceived “authoritiveness” (~Michael Burry)
Charlie Munger - comparison with ants
Another type of ant demonstrates that the limited brain of ants can be misled by circumstances as well as by clever manipulation from other creatures. The brain of this ant contains a simple behavioral program that directs the ant, when walking, to follow the ant ahead. And when these ants stumble into walking in a big circle, they sometimes walk round and round until they perish.
It seems obvious, to me at least, that the human brain must often operate counterproductively just like the ant’s, from unavoidable oversimplicity in its mental process, albeit usually in trying to solve problems more difficult than those faced by ants that don’t have to design airplanes.
The perception system of man clearly demonstrates just such an unfortunate outcome. Man is easily fooled, either by the cleverly thought out manipulation of man, by circumstances occurring by accident, or by very effective manipulation practices that man has stumbled into during “practice evolution” and kept in place because they work so well.
Charlie Munger - stimulus level & magician comparison
If stimulus is kept below a certain level, it does not get through. And, for this reason, a magician was able to make the Statue of Liberty disappear after a certain amount of magician lingo expressed in the dark.
The audience was not aware that it was sitting on a platform that was rotating so slowly, below man’s sensory threshold, that no one could feel the acceleration implicit in the considerable rotation. When a surrounding curtain was then opened in the place on the platform where the Statue had earlier appeared, it seemed to have disappeared.
And even when perception does get through to man’s brain, it is often misweighted, because what is registered in perception is in shockingness of apparent contrast, not the standard scientific units that make possible science and good engineering.
A magician demonstrates this sort of contrast- based error in your nervous system when he removes your wristwatch without your feeling it. As he does this, he applies pressure of touch on your wrist that you would sense if it was the only pressure of touch you were experiencing. But he has concurrently applied other intense pressure of touch on your body, but not on your wrist, “swamping” the wrist pressure by creating a high-contrast touch pressure elsewhere. This high contrast takes the wrist pressure below perception.
Investing - deriving the “truth”
–> like BOTC: “everybody might lie” in any context (Leonie as good character, myself about Paul’s pulse, gamemaster about undertaker seeing “spy”, etc.) –> also, in Hercule Poroit “Lord Edgware dies” the purse or sth dated from last autumn with some initials - essentially was a red herring - and one had to “ignore/underweigh” this clue –> generally, assume “zero-truth-guarantee”, but also that “mostly, most things are correct” (?)
Charlie Munger - cognition is ordinarily situation-dependent
Some psychology professors like to demonstrate the inadequacy of contrast-based perception by having students put one hand in a bucket of hot water and one hand in a bucket of cold water. They are then suddenly asked to remove both hands and place them in a single bucket of room- temperature water. Now, with both hands in the same water, one hand feels as if it has just been put in cold water and the other hand feels as if it has just been placed in hot water. When one thus sees perception so easily fooled by mere contrast, where a simple temperature gauge would make no error, and realizes that cognition mimics perception in being misled by mere contrast, he is well on the way toward understanding, not only how magicians fool one, but also how life will fool one. This can occur, through deliberate human manipulation or otherwise, if one doesn’t take certain precautions against often-wrong effects from generally useful tendencies in his perception and cognition.
Man’s—often wrong but generally useful— psychological tendencies are quite numerous and quite different. The natural consequence of this profusion of tendencies is the grand general principle of social psychology: cognition is ordinarily situation-dependent so that different situations often cause different conclusions, even when the same person is thinking in the same general subject area
Charlie Munger - psychology-based tendencies
Reward and Punishment Superresponse Tendency
One of my favorite cases about the power of incentives is the Federal Express case. The integrity of the Federal Express system requires that all packages be shifted rapidly among airplanes in one central airport each night. And the system has no integrity for the customers if the night work shift can’t accomplish its assignment fast. And Federal Express had one hell of a time getting the night shift to do the right thing. They tried moral suasion. They tried everything in the world without luck. And, finally, somebody got the happy thought that it was foolish to pay the night shift by the hour when what the employer wanted was not maximized billable hours of employee service but fault-free, rapid performance of a particular task. Maybe, this person thought, if they paid the employees per shift and let all night shift employees go home when all the planes were loaded, the system would work better. And, lo and behold, that solution worked.
We should also heed the general lesson implicit in the injunction of Ben Franklin in Poor Richard’s Almanack: “If you would persuade, appeal to interest and not to reason.”
–> Never, ever, think about something else when you should be thinking about the power of incentives.
–> Perhaps the most important rule in management is “Get the incentives right.”
But there is some limit to a desirable emphasis on incentive superpower … Later, B. F. Skinner lost most of his personal reputation (a) by overclaiming for incentive superpower to the point of thinking he could create a human utopia with it and (b) by displaying hardly any recognition of the power of the rest of psychology.
The general antidotes here are: (1) especially fear professional advice when it is especially good for the advisor; (2) learn and use the basic elements of your advisor’s trade as you deal with your advisor; and (3) double check, disbelieve, or replace much of what you’re told, to the degree that seems appropriate after objective thought.
Another generalized consequence of incentive- caused bias is that man tends to “game” all human systems, often displaying great ingenuity in wrongly serving himself at the expense of others. Anti- gaming features, therefore, constitute a huge and necessary part of almost all system design.
Charlie Munger - Westinghouse - on incentives
Now there are two special classes of loans that naturally cause much trouble for lenders. The first is ninety-five percent-of-value construction loans to any kind of real estate developer, and the second is any kind of construction loan on a hotel. So, naturally, if one was willing to loan approximately ninety-five percent of the real cost to a developer constructing a hotel, the loan would bear a much-higher-than-normal interest rate because the credit- loss danger would be much higher than normal. So, sound accounting for Westinghouse in making a big, new mass of ninety-five percent-of-value construction loans to hotel developers would have been to report almost no profit, or even a loss, on each loan until, years later, the loan became clearly worth par. But Westinghouse instead plunged into big-time construction lending on hotels, using accounting that made its lending officers look good because it showed extremely high starting income from loans that were very inferior to the loans from which the company had suffered small credit losses in the past. This terrible accounting was allowed by both international and outside accountants for Westinghouse as they displayed the conduct predicted by the refrain: “Whose bread I eat, his song I sing.”
“Granny’s Rule” provides another example of reward superpower, so extreme in its effects that it must be mentioned here. You can successfully manipulate your own behavior with this rule, even if you are using as rewards items that you already possess! Indeed, consultant Ph. D. psychologists often urge business organizations to improve their reward systems by teaching executives to use “Granny’s Rule” to govern their own daily behavior. Granny’s Rule, to be specific, is the requirement that children eat their carrots before they get dessert. And the business version requires that executives force themselves daily to first do their unpleasant and necessary tasks before rewarding themselves by proceeding to their pleasant tasks. Given reward superpower, this practice is wise and sound. Moreover, the rule can also be used in the nonbusiness part of life. The emphasis on daily use of this practice is not accidental. The consultants well know, after the teaching of Skinner, that prompt rewards work best.
Liking/Loving Tendency & Disliking/Hating Tendency
Liking or loving, intertwined with admiration in a feedback mode, often has vast practical consequences in areas far removed from sexual attachments. For instance, a man who is so constructed that he loves admirable persons and ideas with a special intensity has a huge advantage in life. This blessing came to both Buffett and myself in large measure, sometimes from the same persons and ideas. 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.
There are large social policy implications in the amazingly good consequences that ordinarily come from people likely to trigger extremes of love and admiration boosting each other in a feedback mode. For instance, it is obviously desirable to attract a lot of lovable, admirable people into the teaching profession.
Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues in the object of dislike, (2) dislike people, products, and actions merely associated with the object of his dislike, and (3) distort other facts to facilitate hatred.
Distortion of that kind is often so extreme that miscognition is shockingly large. 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.
–> implications for products/businesses/employees/etc?
Doubt Avoidance Tendency
The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision.
It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt- Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors.
Inconsistency-Avoidance Tendency
When Marley’s miserable ghost says, “I wear the chains I forged in life,” he is talking about chains of habit that were too light to be felt before they became too strong to be broken.
Also tending to be maintained in place by the anti-change tendency of the brain are one’s previous conclusions, human loyalties, reputational identity, commitments, accepted role in a civilization, etc. It is not entirely clear why evolution would program into man’s brain an anti-change mode alongside his tendency to quickly remove doubt.
It is easy to see that a quickly reached conclusion, triggered by Doubt-Avoidance Tendency, when combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modern man. And so it observably works out. We all deal much with others whom we correctly diagnose as imprisoned in poor conclusions that are maintained by mental habits they formed early and will carry to their graves.
–> some of the best investors, e.g. Soros, described as “being able to change on a dime” –> maybe their advantage, partly, was “only” to change more quickly than others (?)
What Keynes was reporting is that the human mind works a lot like the human egg. When one sperm gets into a human egg, there’s an automatic shut-off device that bars any other sperm from getting in. The human mind tends strongly toward the same sort of result.
And so, people tend to accumulate large mental holdings of fixed conclusions and attitudes that are not often reexamined or changed, even though there is plenty of good evidence that they are wrong.
One corollary of Inconsistency-Avoidance Tendency is that a person making big sacrifices in the course of assuming a new identity will intensify his devotion to the new identity. After all, it would be quite inconsistent behavior to make a large sacrifice for something that was no good. And thus civilization has invented many tough and solemn initiation ceremonies, often public in nature, that intensify new commitments made.
Tough initiation ceremonies can intensify bad conduct as well as good. The loyalty of the new, “made-man” mafia member, or of the military officer making the required “blood oath” of loyalty to Hitler, was boosted through the triggering of Inconsistency-Avoidance Tendency.
Inconsistency-Avoidance Tendency - what happens if we “only pretend” something?
So strong is Inconsistency-Avoidance Tendency that it will often prevail after one has merely pretended to have some identity, habit, or conclusion. Thus, for a while, many an actor sort of believes he is Hamlet, Prince of Denmark. And many a hypocrite is improved by his pretensions of virtue. And many a judge and juror, while pretending objectivity, is gaining objectivity. And many a trial lawyer or other advocate comes to believe what he formerly only pretended to believe.
Curiosity Tendency
There is a lot of innate curiosity in mammals, but its nonhuman version is highest among apes and monkeys. Man’s curiosity, in turn, is much stronger than that of his simian relatives. In advanced human civilization, culture greatly increases the effectiveness of curiosity in advancing knowledge. For instance, Athens (including its colony, Alexandria) developed much math and science out of pure curiosity while the Romans made almost no contribution to either math or science. They instead concentrated their attention on the “practical” engineering of mines, roads, aqueducts, etc. Curiosity, enhanced by the best of modern education (which is by definition a minority part in many places), much helps man to prevent or reduce bad consequences arising from other psychological tendencies. The curious are also provided with much fun and wisdom long after formal education has ended.
–> innovation in a company –> culture key (?)
Kantian Fairness Tendency
Kant was famous for his “categorical imperative,” a sort of a “golden rule” that required humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody. And it is not too much to say that modern acculturated man displays, and expects from others, a lot of fairness as thus defined by Kant.
Envy/Jealousy Tendency
A member of a species designed through evolutionary process to want often-scarce food is going to be driven strongly toward getting food when it first sees food. And this is going to occur often and tend to create some conflict when the food is seen in the possession of another member of the same species. This is probably the evolutionary origin of the envy/jealousy Tendency that lies so deep in human nature.
As I have shared the observation of life with Warren Buffett over decades, I have heard him wisely say on several occasions: “It is not greed that drives the world, but envy.”
Reciprocation Tendency
Of course, the tendency to reciprocate favor for favor is also very intense, so much so that it occasionally reverses the course of reciprocated hostility. Weird pauses in fighting have sometimes occurred right in the middle of wars, triggered by some minor courtesy or favor on the part of one side, followed by favor reciprocation from the other side, and so on, until fighting stopped for a considerable period. This happened more than once in the trench warfare of World War I, over big stretches of the front and much to the dismay of the generals.
It is obvious that commercial trade, a fundamental cause of modern prosperity, is enormously facilitated by man’s innate tendency to reciprocate favors. In trade, enlightened self-interest joining with Reciprocation Tendency results in constructive conduct. Daily interchange in marriage is also assisted by Reciprocation Tendency, without which marriage would lose much of its allure.
And Reciprocation Tendency, insomuch as it causes good results, does not join forces only with the superpower of incentives. It also joins Inconsistency-Avoidance Tendency in helping cause (1) the fulfillment of promises made as part of a bargain, including loyalty promises in marriage ceremonies, and (2) correct behavior expected from persons serving as priests, shoemakers, physicians, and all else.
For instance, when an automobile salesman graciously steers you into a comfortable place to sit and gives you a cup of coffee, you are very likely being tricked, by this small courtesy alone, into parting with an extra five hundred dollars. This is far from the most extreme case of sales success that is rooted in a salesman dispensing minor favors. However, in this scenario of buying a car, you are going to be disadvantaged by parting with an extra five hundred dollars of your own money. This potential loss will protect you to some extent.
Carrying out this experiment, Cialdini caused his “compliance practitioners” to wander around his campus and ask strangers to supervise a bunch of juvenile delinquents on a trip to a zoo. Because this happed on a campus, one person in six out of a large sample actually agreed to do this. After accumulating this one-in-six statistic, Cialdini changed his procedure. His practitioners next wandered around the campus asking strangers to devote a big chunk of time every week for two years to the supervision of juvenile delinquents. This ridiculous request got him a one hundred percent rejection rate. But the practitioner had a follow-up question: “Will you at least spend one afternoon taking juvenile delinquents to a zoo?” This raised Cialdini’s former acceptance rate of 1/6 to 1/2—a tripling.
What Cialdini’s “compliance practitioners” had done was make a small concession, which was reciprocated by a small concession from the other side. This subconscious reciprocation of a concession by Cialdini’s experimental subjects actually caused a much increased percentage of them to end up irrationally agreeing to go to a zoo with juvenile delinquents. Now, a professor who can invent an experiment like that, which so powerfully demonstrates something so important, deserves much recognition in the wider world, which he indeed got to the credit of many universities that learned a great deal from Cialdini.
Charlie Munger on the development on guilt
Before we leave reciprocate-favor tendency, the final phenomenon we will consider is wide- spread human misery from feelings of guilt. To the extent the feeling of guilt has an evolutionary base, I believe the most plausible cause is the mental conflict triggered in one direction by reciprocate- favor tendency and in the opposite direction by reward superresponse tendency pushing one to enjoy one hundred percent of some good thing. Of course, human culture has often greatly boosted the genetic tendency to suffer from feelings of guilt. Most especially, religious culture has imposed hard-to-follow ethical and devotional demands on people.
Influence-from-Mere-Association Tendency
But there is another type of conditioned reflex wherein mere association triggers a response. For instance, consider the case of many men who have been trained by their previous experience in life to believe that when several similar items are presented for purchase, the one with the highest price will have the highest quality. Knowing this, some seller of an ordinary industrial product will often change his product’s trade dress and raise its price significantly hoping that quality-seeking buyers will be tricked into becoming purchasers by mere association of his product and its high price. This industrial practice frequently is effective in driving up sales and even more so in driving up profits. For instance, it worked wonderfully with high-priced power tools for a long time. And it would work better yet with high-priced pumps at the bottom of oil wells. With luxury goods, the process works with a special boost because buyers who pay high prices often gain extra status from thus demonstrating both their good taste and their ability to pay.
Even association that appears to be trivial, if carefully planned, can have extreme and peculiar effects on purchasers of products. The target purchaser of shoe polish may like pretty girls. And so he chooses the polish with the pretty girl on the can or the one with the pretty girl in the last ad for shoe polish that he saw.
Similarly, it is not from mere chance that military bands play such impressive music. That kind of music, appearing in mere association with military service, helps to attract soldiers and keep them in the army. Most armies have learned to use mere association in this successful way.
The damage to the mind that can come from liking and loving was once demonstrated by obviously false testimony given by an otherwise very admirable woman, the wife of a party in a jury case. The famous opposing counsel wanted to minimize his attack on such an admirable woman yet destroy the credibility of her testimony. And so, in his closing argument, he came to her testimony last. He then shook his head sadly and said, “What are we to make of such testimony? The answer lies in the old rhyme:
‘As the husband is, So the wife is.
She is married to a clown,
And the grossness of his nature Drags her down.’”
The jury disbelieved the woman’s testimony. They easily recognized the strong misinfluence of love on her cognition. And we now often see even stronger misinfluence from love as tearful mothers, with heartfelt conviction, declare before TV cameras the innocence of their obviously guilty sons.
Antidote to “Influence-from-Mere-Association Tendency”
The proper antidotes to being made such a patsy by past success are (1) to carefully examine each past success, looking for accidental, non- causative factors associated with such success that will tend to mislead as one appraises odds implicit in a proposed new undertaking and (2) to look for dangerous aspects of the new undertaking that were not present when past success occurred.
“Persian Messenger Syndrome” and antidote
Ancient Persians actually killed some messengers whose sole fault was that they brought home truthful bad news, say, of a battle lost. It was actually safer for the messenger to run away and hide, instead of doing his job as a wiser boss would have wanted it done.
The proper antidote to creating Persian Messenger Syndrome and its bad effects, like those at CBS, is to develop, through exercise of will, a habit of welcoming bad news. At Berkshire, there is a common injunction: “Always tell us the bad news promptly. It is only the good news that can wait.” It also helps to be so wise and informed that people fear not telling you bad news because you are so likely to get it elsewhere.
Influence-from-Mere-Association Tendency - reverse effects on favours
Influence-from-Mere-Association Tendency often has a shocking effect that helps swamp the normal tendency to return favor for favor. Sometimes, when one receives a favor, his condition is unpleasant, due to poverty, sickness, subjugation, or something else. In addition, the favor may trigger an envy-driven dislike for the person who was in so favorable a state that he could easily be a favor giver. Under such circumstances, the favor receiver, prompted partly by mere association of the favor giver with past pain, will not only dislike the man who helped him but also try to injure him. This accounts for a famous response, sometimes dubiously attributed to Henry Ford: “Why does that man hate me so? I never did anything for him.” I have a friend, whom I will now call “Glotz,” who had an amusing experience in favor-giving. Glotz owned an apartment building that he had bought because he wanted, eventually, to use the land in different development. Pending this outcome, Glotz was very lenient in collecting below-market rents from tenants. When, at last, there was a public hearing on Glotz’s proposal to tear down the building, one tenant who was far behind in his rent payments was particularly angry and hostile. He came to the public hearing and said, “This proposal is outrageous. Glotz doesn’t need any more money. I know this because I was supported in college by Glotz fellowships.”