In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 24 – Reason-Respecting Tendency.  There is in humans a natural love of accurate cognition and joy in its exercise. Thus, people learn best when they are given the correct reason for what is taught. The positive lesson, then, is to really think through reasons for giving orders and communicate these reasons to the recipient. The negative lesson is that scoundrels take advantage of this tendency all the time. For instance, have you ever waited in a line to make a copy, while someone jumped to the front of the line exclaiming, “I have to make a copy.”  Chances are that the scoundrel got away with it because he or she gave a reason. It was only later that your rational mind came to understand that it was hoodwinked by this tendency.

Number 25 – Lollapalooza Tendency – The Tendency to Get Extreme Consequences from Confluences of Psychological Tendencies Acting in Favor of a Particular Outcome. Say what? Basically, it is what cults will do to achieve a conversion. They’ll use any psychological trick in the book, and often many of them. But the tactic is not exclusive to cults. Persuasive people everywhere rely on this tendency to get what they want.

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 22 - Authority-Misinfluence Tendency.  Munger provides a lot of examples of this one, but the gist is that there is a natural tendency to follow the leader - often without question and often with absurd results.  By virtue of his or her dominant position, the leader is given a very wide berth, and often too wide of a berth.  Be careful in your use of the position, and your actions in following another in that position.

Number 23 – Twaddle Tendency.  Twaddle – drivel, nonsense, prattle, rubbish – is something far too many people pour out at inappropriate times, interfering with the good work a leader is trying to promote. It’s not an innocuous annoyance; it’s damaging. Munger advises leaders to be aware of it and look to protect their best people from it.

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 19 - Use-It-or-Lose-It Tendency.  I was like Munger in at least one respect...I used to be pretty good at calculus and I enjoyed it.  But once graduate school was over, I never practiced it.  Today, I couldn’t begin to solve a calculus problem.  Is this a great loss?  Munger argues it is.  First, the wise man engages in the practice of all his useful, albeit rarely used skills, as a sort of duty to better himself.  Second, if he reduces the number of skills he practices, and therefore the number of skills he retains, he will naturally drift into error from "man with a hammer tendency."  And third, his overall learning capacity will shrink.

Number 20 - Drug-Misinfluence.  Similar in destructive power to Number 11 - Simple, Pain-Avoiding Psychological Denial.  Munger comments little on this simply because he says its "destructive power is so widely known to be intense, with frequent tragic consequences for cognition and the outcome of life."

How does this come into play in the leadership experience?  First, with the leader.  It is the leader’s obligation to himself, his team, and his organization to make it a complete non-issue.  Second, it is the leader’s responsibility to be aware of how it might be at work undermining his or her mission.

Number 21 - Senescence-Misinfluence Tendency.  It is hard to get around the natural cognitive decay that occurs with age.  When very old, very few people are good at learning complex new skills.  They can, however, remain pretty good at maintaining intensely practiced old skills until late in life. Antidotes?  If it’s you we are talking about, make sure you continuously think and learn.  That can help stave off this effect.  If it’s someone else, be aware and manage around the issue.

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 16 - Contrast-Misreaction Tendency.  Ben Franklin said, "A small leak will sink a great ship."  See, humans are very good at recognizing clear contrast.  And people exploit that.  We are very poor at discerning slight variation.  We don’t notice "small leaks."   And people exploit that.  And we make mistakes because of that. 

This tendency is exploited, for instance, by an automobile salesman who sells a stupid, terribly overpriced option for $1,000, because it pales in comparison to the $65,000 car the buyer just bought.  Low contrast - buyer thinks it’s insignificant.  Or by a real estate broker who first shows a potential buyer three awful homes, ridiculously overpriced, and then shows a merely bad home, at a price only moderately too high.  High contrast - buyer thinks he’s getting a deal.  On the domestic front, how about men who marry second wives who would be appraised as okay only in comparison to the first wife.   

Number 17 - Stress-Influence Tendency.  Light stress can improve performance, while heavy stress can cause disfunction.  The most common type of disfunction resulting from stress is depression.  Fortunately, there are a number of effective treatments for depression.  But what about the lesser known, equally insidious forms of mental breakdowns that result from stress?  A leader is well-advised to be aware of the stress-producing forces in his or her organization and learn to recognize, and protect against, cases where heavy stress begins to de-energize team members and, ultimately, the organization.   

Number 18 - Availability-Misweighing Tendency.  Echoing the words of the song, "When I’m not near the girl I love, I love the girl I’m near."  The tendency, with our limited capacity, is to work with what is easily available to us.  Antidotes: First, use checklists and procedures to keep you open to what is not near.  Second, emphasize disconfirming evidence; look for ways to make the task more difficult.  Third, bring skeptics into the mix and make them challenge you.  Finally, underweigh the obvious - the near - and overweigh the les vivid evidence. On the positive side, look for ways to use this powerful tendency in others to your advantage  

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 13 - Overoptimism Tendency.  Demosthenes, the most famous Greek orator, said, "What a man wishes, that also will he believe."  How else do you explain our love of gambling and investing?  Antidote: simple probability math that we all learned in high school.

Number 14 -  Deprival-Superreaction Tendency.  Munger describes two types of tendencies here.  First, the fact that humans generally feel the pain of a loss much more than the thrill of a gain.  Second, if we are very close to gaining something we greatly want, but lose it at the last moment, we react as if we had owned the gain and it was stolen from us.  So, in displaying this tendency, we often compare what is near instead of what really matters.  For instance, the guy with $10 million in his brokerage account who is highly irritated when he accidentally loses $100 of the $300 in cash he’s carrying around.  See, we ordinarily react with such an irrational intensity to even a small loss, or threatened loss, of property, love, friendship, dominated territory, opportunity, status, or any other valued thing.  Munger notes that, given that bureaucracies are perfect breeding grounds for these kinds of reactions, one of Jack Welch’s wisest actions at GE was fighting to eliminate bureaucracy.

Munger cites a number of different, and very interesting, examples and variations of this tendency.  One is how it operates, in combination with the Inconsistency-Avoidance Tendency (No. 5), as between ideological believers and non-believers.  The believers are highly threatened, sensing a possible loss of safety and security in their beliefs and the status quo.  Great agitation, and often violence, results.  Possible antidote to the ideological group thinkers: never let them get too comfortable; always make sure there are able and articulate non-believers who are accepted by the leader as critical team members.  Another idea: insist on a culture of courtesy, much like the U.S. Supreme Court.

Number 15 - Social Proof Tendency.  The tendency to think and act as we see others around us acting and thinking.  And leaders are often the prime examples of this tendency at work.  Witness the Internet bubble of the late 1990s and very early 2000s.  We see another leader, or several leaders, doing something, and we doubt our current position and wonder if that other leader or those other leaders know something we don’t.  This tendency is intensified by stress or puzzlement.  It’s why cults target people who are out of sorts, feeling lost. By the way, this tendency is just as potent when it comes to omission as commission.  We are often lulled into inaction by the inaction of others, when we know in our hearts we should be acting.  

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 10 - Influence-from-Mere-Association Tendency.  You know this one.  The one that makes beer producers put beautiful women in their television ads.  More insidiously, the one that makes makers of some products charge a high price, knowing that many consumers associate that with quality.  This one is at work constantly, often working on the sub- and even unconscious level.  Another take on this is "to assume is to make an "ass" out of "u" and "me"."  

Munger talks about one bad effect of this tendency, what he calls the "Persian Messenger Syndrome."  Ancient Persians would kill the messenger of bad news.  Today, it’s what makes some lawyers keep toiling away on a bad case, rather than tell their client what they know in their heart.  It’s what makes subordinates shy away from telling leaders what is really happening in the market or in their shop. Antidote: build a culture, as Warren Buffet has done at Berkshire, of welcoming bad news, even before the good news.

Number 11 - Simple, Pain-Avoiding Psychological Denial Tendency.  The reality is too painful to bear, so distort the facts until they become bearable.  I worked with the board of a company once that did this for several years with respect to the extremely poor performance of its CEO, only because the pain of having to replace him seemed  too great to bear. 

Number 12 - Excessive Self-Regard Tendency.  We all know this one.  The one that leads ninety percent of Swedish drivers to rate themselves as above average.  It also applies to one’s major relationships and possessions.  We tend to over-appraise our spouses, children, cars, homes, you-name-it.  And then we tend to prefer people who are most like ourselves.  (Think about the negative effect of this in the hiring process.)  And we tend to like our decisions a lot after we have made them, often more than is objectively justified.

Antidote: force yourself to be more objective when thinking about yourself, your family and friends, your property, and the value of your future and past activity.  It’s not easy, but will serve you better than simply letting this natural tendency take its course.  (Chapter One of my book, The Source of Leadership, deals with employing presence as a means of achieving, among other things, higher conscious awareness.)

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 7 - Kantian Fairness Tendency.  Kant was famous for his "categorical imperative," a "golden rule" that requires humans to follow those behavior patterns that, if followed by all others, would make the human system work best for everybody.  Basically, humans expect a lot of fairness.  Witness the way most people let other drivers cross in front of them, largely because that is the courtesy they would like when roles are reversed.  Witness the way people almost innately line up in a first-come, first-served system when uncertain about what else to do.  Conversely, witness the reactive hostility that can arise when the "fairness" that is expected is not provided. 

Number 8 - Envy/Jealousy Tendency.  I’m going to edit Munger here slightly because business generally involves envy (indeed, Warren Buffett has said that "it is not greed that drives the world, but envy") and not jealousy.  Envy involves an "envier" and a "rival" for something considered by the envier to be good.  The envier’s real concern is the rival.  Jealousy involves three parties: the subject, the rival, and the beloved.  The subject’s real concern is the beloved. The distinction from jealously aside, the power of the envy in business is extreme, and yet it is considered almost taboo to discuss as a tendency.  Munger believes the reason is that it is essentially an allegation of mental unfitness, and people are extremely reluctant to go there.  He suggests it is time to recognize, and discuss, it as the force that it is.  

Number 9 - Reciprocation Tendency.  Humans have an automatic tendency to reciprocate both favors and disfavors.  In business, on the favor side, obviously it behooves us to understand the reciprocal power of dispensing favors strategically.  It is the reason, for example, investment banks shower gifts - e.g., special events, research - on potential clients.  Conversely, it is the reason many organizations prohibit the acceptance of any favors from vendors.  Sam Walton wouldn’t allow his buyers to accept so much as a hot dog from a vendor.  On the disfavor side, Munger points out that the "turn-the-other-cheek" behavior, if the good idea it seems, will require "a lot of heavy lifting because...genes won’t be of much help."  

Munger cites an interesting psychological experiment conducted by a fellow named Cialdini.  He asked his "compliance practitioners" to wander around a college campus and ask for volunteers to supervise a bunch of juvenile delinquents on an afternoon trip to a zoo.  One out of six accepted, which is amazing itself.  His practitioners then asked a separate group of people if they would devote a big chunk of time every week for two years to supervising juvenile delinquents.  They received a 100% rejection rate.  But...when the respondents were then asked if they would supervise a bunch of juvenile delinquents on an afternoon trip to a zoo, three out of six said they would.  The practitioners made a small concession - essentially, allowing the respondents to say no to an outrageous request - and the respondents irrationally agreed to the first request.  Another example: the Attorney General under Nixon who allowed his subordinate to execute the Watergate burglary after rejecting his wild plan for advancing Republican interests through some combo of whores and big yac

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 4 - Doubt-AvoidanceTendency.  The human brain is programmed with a tendency to quickly remove doubt by reaching some decision.  Indeed, it is a critical survival instinct and almost always triggered by puzzlement and stress.  An unthreatened human, thinking of nothing in particular, is not being prompted to remove doubt through rushing to some decision.  Ah, even Charlie Munger recognizes the virtue of presence. 

Number 5 - Inconsistency-AvoidanceTendency.  "The brain of man conserves programming space by being reluctant to change."  Thus, habits die hard, as do previous conclusions, loyalties, reputational identity, commitments, accepted role in civilization, among others.  While often useful to individuals and society as a whole, this tendency gets in the way of creativity, innovation, and the flexibility required for success in our high velocity, highly dynamic modern world.  And "it is easy to see that a quickly reached conclusion, triggered by Doubt-Avoidance Tendency [Number 4], when combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modern man."  

Number 6 - Curiosity Tendency.  Although generally a very useful tendency, and one that helps people to prevent or reduce negative consequences arising from the other psychological tendencies, curiosity can be overdone and interfere with the accomplishment of practical tasks. 

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.

In the "Psychology of Human Misjudgment," Charlie Munger, Warren Buffet’s long-time business partner, assembled a list of 25 psychology-based tendencies that, while often useful, often mislead.

Number 1 - The Reward and Punishment Superresponse Tendency.  Munger places himself in the top 5% of  people in his ability to understand the power of incentives, and yet he believes he has consistently underestimated that power.  Quoting Ben Franklin, that "if you would persuade, appeal to interest and not to reason," Munger says, "Never, ever, think about something else when you should be thinking about the power of incentives."  He suggests that the most important rule in management is "Get the incentives right." 

He cautions against an important but unavoidable consequence of this tendency, called "incentive-based bias."  A person has an acculturated nature making him or her a pretty decent person, and yet, driven both consciously and unconsciously by incentives, he or she drifts into immoral behavior in order to get what he or she wants, a result he or she facilitates by rationalizing his or her behavior. 

A consequence of incentive-based bias, then, is that people tend to "game" all human systems, often displaying great ingenuity in wrongly serving themselves at the expense of others.  Thus, any system based on incentives must also include counter-incentives, including punishments.

Number 2 - Liking/Loving Tendency.  At a very primal level, humans like and love being liked and loved.  One consequence of the tendency is that it acts as a conditioning device that makes the liker or lover tend (1) to ignore faults of, and comply with the wishes of, the object of his affection; (2) to favor people, products, and actions merely associated with the object of his affection; and (3) to distort other facts to facilitate love.  And the phenomenon of liking and loving causing admiration also works in reverse, because admiration also causes or intensifies liking or love.  With this "feedback mode" in place, the consequences are often extreme, sometimes even causing deliberate self-destruction to help what is loved.

Number 3 - Disliking/Hating Tendency.  Just as the newborn human is born to seek love, he or she is also born to dislike and hate certain conditions or things.  This tendency 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 dislike; and (3) distort other facts to facilitate hatred.    

From Poor Charlie’s Almanack (2005), a compilation of the wit and wisdom of Charles T. Munger.