Thursday, October 25, 2007

Success Secrets: Munger "Misjudgment" Single Post

Recently, I posted a series of posts related to Charlie Munger’s “Psychology of Human Misjudgment”. This post is intended to combine all the previous posts in one handy location.


Charlie Munger is well-known as vice-Chairman of Berkshire Hathaway , whose chairman is fellow billionaire Warren Buffett. In many speeches and writings, Munger has tried to elucidate the various mental “shortcut algorithms” we humans have evolved over the eons to make decisions quickly. Since we are living in a more complicated era than our primate ancestors, it is incumbent on us to be able to parse out when these vestigial processes are unduly influencing decisions that could be made more rationally.

We are indebted to Munger for his pursuit of these principles, because they frequently represent “blind spots” in our cognition. These “misjudgment tendencies” are so much a part of our nature that , without the checklist provided by Munger, we might never see them. Indeed I would be surprised if , even with years if self-examination, we could ever detect all of them in our own decision-making process.

Munger’s ideas on this subject have continued to deepen and broaden over the years. My goal is to create an accessible summary of these landmark ideas, but nothing substitutes for Munger’s own words. Please read the original. This summary is my attempt to compress the ideas into a shorter space, and to include an alternate descriptor for each tendency which might aid quick recall. Or, not. The most recent collection of Munger’s include 25 concepts. The list here is derived from that numbering.

1. Munger Descriptor: Reward and Punishment Superresponse Tendency
Alternate Descriptor: Each person responds most strongly to what they view as the strongest incentives and the strongest disincentives.

Expect that people will operate in their own self interest, including doctors, lawyers, brokers, your friends, relatives, employees and employers.

Structure incentives correctly, and you get great results. Structure them incorrectly, even by accident, and expect disaster.

Reflect constantly on the real incentives of any person you are dealing with. “What are they getting out of this?”

2. Munger Descriptor: Liking/loving Tendency
Alternate Descriptor: Humans have a natural tendency to like and love, and to want to be liked and loved.

This tendency can be used to mold behavior, good and bad. In other words, this tendency can be a driver of behavior. People will sacrifice their lives for what they love. They will adopt the habits, likes, and dislikes of those they love. And they will ignore the faults of those they love.

Implicit in Munger’s treatment is the concept that we should expect this tendency to override “rational” or other “expected” behavior.

3. Munger Descriptor: Disliking/Hating Tendency
Alternate descriptor: The tendency to dislike and hate can be used to mold behavior

Hatred can bond people as strongly as love.

Again, we should expect this tendency to override “rational” or other “expected” behavior.

Munger suggests the following “antidotes” as means for moving towards rational behavior:

Checklists
Deliberation
Seek disconfirming evidence (contrary to your “gut”)
Identification of self-interest with the best decisionmaking processes available
Liking/Admitting the most competent, ethical people
Keeping track of mistakes in judgment

4. Munger Descriptor: Doubt-Avoidance Tendency
Alternate Descriptor: Making decisions too quickly because of emotional, rather than rational reasons

Expect people to make hurried, possibly bad, decisions under stress. Attempt to avoid this tendency when making your own decisions.

5. Munger Descriptor: Inconsistency-Avoidence Tendency
Alternate Descriptor: We are habit-driven. We behave in a manner we deem consistent with our identity.

Expect people to be trapped in habits of thought for their lifetime. Expect people to ignore evidence when it is counter to their identity.

To adopt a new (good) habit, use the concept of consistency with the new identity to reinforce the habit. “Fake it until you make it”.

To avoid self-consistency bias, look for disconfirming evidence.

6. Munger Descriptor: Curiosity Tendency
Alternate Descriptor: Curiosity Tendency

Curiosity can aid the quest to reduce the other ‘human misjudgments”. Munger’s mention of the less-curious Romans (as opposed to the Greeks) is a reminder that we can gain much practical use from the curiosity of others that have gone before us.


7. Munger Descriptor: Kantian Fairness Tendency
Alternate descriptor: People in civil societies often behave as they would like others to behave toward them.

Munger notes that this behavior appears to have become much more common after Kant formulated his “Categorical Imperative” . The implication (to my mind) is that human reason can have a civilizing effect.

8. Munger Descriptor:Envy/Jealousy Tendency
Alternate Descriptor: Jealousy and envy are stronger in common practice than we allow ourselves to believe.

This is the “500 pound gorilla in the room” kind of trait that no one talks about, although, as Munger reminds us, it is screamingly apparent in families, universities, and all manner of professional firms. We ignore this trait at our peril.

9. Munger Descriptor: Reciprocation Tendency
Alternate descriptor: Tendency to reciprocate both favors and harm

Expect reciprocation for favors awarded and for perceived harm done. Feuds can be endless and last for generations. “Turning the other cheek” may be unnatural, and even dangerous, especially in advanced cultures that should want to protect themselves from aggression.

The tendency to reciprocate can be both positive (helping to deepen the bonds of productive relationships) or negative (as when we are led to grant favors that should not be granted, because we have been granted a favor).

10. Munger Descriptor: Influence-From-Mere-Association-Tendency
Alternate descriptor: The power of association encourages feeling over thought.

The power of association can influence behavior as when a product is promoted with a lifestyle, military service is promoted with impressive music, or when a product is “upscaled” (as in coffee with Starbucks). A second type of association occurs when we trick ourselves into repeating a behavior because it succeeded for us “the last time”. Thirdly, we may misjudge people’s abilities because we don’t alike a particular aspect of the person, and “tar” the entire person, or even a whole group of persons , “with the same brush”, although individuals vary widely from groups to which they may belong.

Munger explains to us that we human beings tend to use mental shortcuts that tempt us to avoid “drilling down” from the general to the particular. Another aspect is that our feelings are an older part of our brain anatomy, whereas our rational side is a newer evolutionary tool, that often gets downplayed because it doesn’t “feel” as “true”.

11. Munger Descriptor: Simple Pain-Avoiding Psychological Denial
Alternate Descriptor: Full or Partial Denial of Painful Facts

Expect extremely painful memories or unpleasant facts to be “re-configured” or denied. Expect that people simply find some facts (such as death, failure, chemical dependency) too painful to bear, so they act as if these unpleasant facts do not exist or deny the strength of those facts.

12. Munger Descriptor: Excessive Self-Regard Tendency
Alternate Descriptor: Overestimating one’s uniqueness in any area

We regard anything “like us”, or any decision we make, or anything we own, as “special” because it is something we personally have initiated, approved, etc. People we like, or people “like us”, are “better”, get the benefit of the doubt, etc. Munger always counsels us to search for “disconfirming evidence”. One interpretation: the stronger you “feel” it, the more you should check it before doing it.


13 Munger Descriptor: Overoptimism Tendency
Alternate Descriptor: Optimism without rational foundation

Expect failure if plans are not made rationally. Use mathematical probability techniques. Let the mathematics determine whether a business splan is “rosy”. Use the most pessimistic projections.


14. Munger Descriptor: Deprival Superreaction Tendency
Alternate Descriptor: Unusual sensitivity to real or perceived loss

Something perceived as “taken away” (money, power, perks, status, a comfortable situation) is perceived as a much more painful event than if the same status had never occurred.

This is a subtle and powerful observation and, as Munger says, much “ideological” , religious, and bureaucratic conflict may be traceable to this seldom remarked-upon tendency.

15. Munger Descriptor: Social-Proof Tendency
Alternate Descriptor: Irrationally following the example of others

Expect people to use this unfortunate decision-making shortcut. Conformity can lead to financial problems (“keeping up with the Jones’s”), or even international tragedy (when totalitarian and genocidal regimes slowly use social proof to co-opt a society). Munger tells us that the ability to ignore the urge to follow others, when they are wrong, is a key success factor.


16. Munger Descriptor: Contrast-Misreaction Tendency
Alternate descriptor: We “read too much” into situations involving contrast, and, conversely, pay too little attention to small changes, just below our level of awareness.

A bad price seems good because it is “on sale” from an even higher price. We accept a bad situation simply because it feels better than a previous, even worse situation. Alternatively, we underestimate the consequences of small changes, as when someone becomes addicted to a bad habit or dangerous substance in small steps, or when one becomes dishonest little by little.

17. Munger Descriptor: Stress-Influence Tendency
Alternate descriptor: Stress can cause semi permanent changes in mental states.

Munger suggests that stress-induced depression can be coped-with, even without drugs, and he further theorizes that high stress can be used as a “brainwashing” and even an “un-brainwashing” tool.

18. Munger Descriptor: Availability-Misweighing tendency
Alternate descriptor: Proximity effect

The nearness (or proximity) of an influence can unduly magnify that influence, whereas rational thought would not allow such emphasis. This could apply to easily available (but non-nutritious) junk food, ideas in the media that are irrational (but are so prevalent that we tend to believe them more readily), or basing a decision on statistics, although countervailing “common sense” reasons might be unquantifiable.

19. Munger Descriptor: Use-It-Or-Lose-It-Tendency
Alternate descriptor: Decay of unpracticed skills

Munger recommends practice of various intellectual skills,not just in themselves, but because each intellectual skill provides a “latticework of theory” through which to organize experience. Lose ,say, a particular mathematical skill, and you will lose that “doorway” to understanding experience.

20. Munger Descriptor: Drug-Misinfluence Tendency
Alternate descriptor: impaired judgment due to drugs

Munger’s entry on this one is short, but passionate. Drugs are a recipe for failure in life. I’d like to add that, from my on observations, I believe that there are many degrees of judgment impairment due to drug use, and that the ability to focus and concentrate is swiftly, and perhaps permanently impaired by drug use. I suspect that several generations of Americans have lost their edge due to drugs being available freely, and I don’t see a change in that profile anytime soon.

21. Munger Descriptor: Senescence-Misinfluence Tendency
Alternate descriptor: Mental deterioration with age

Mental agility will decline with age, but can be maintained with practice. Munger is, of course, correct: new research continues to come in about using both mental and physical exercise to maintain mental capacity in later years.

22. Munger Descriptor: Authority-Misinfluence Tendency
Alternate descriptor: Irrationally strong obedience to authority

People tend to follow authority, even though this obedience can produce negative results. Literal interpretation can produce tragic (or even darkly humorous, but disastrous) effects. Blind obedience can also produce horrors of immense magnitude (as in the Nazi-created Holocaust).


23. Munger Descriptor: Twaddle Tendency
Alternate descriptor: Tendency to say meaningless things. At length.

Much is said in our world that is meaningless, and it is often misconstrued to be meaningful. So much is meaningless that the volume of “twaddle” impairs our ability to go about our lives in meaningful ways. Munger exhorts us to make real effort to separate people and ideas that have meaning from his vast overload of people and ideas that, in fact, have little or no meaning or value.

24. Munger Descriptor: Reason-Respecting Tendency
Alternate Descriptor: People tend to comply when a reason, even a bad one, is given.

Munger hastens to remind us that he strongly believes that the use of the word “why”, and the use of a “latticework of theory” are invaluable in assimilating learning and experience. In general, his entire monograph is in favor of finding dispassionate reasoning processes. This particular mention of “Reason-Respecting Tendency” is to remind us that the word “reason” may not, in fact, be an adequate reason for anything, even if someone says it is.

25. Munger Descriptor: Lollapalooza Tendency
Alternate Descriptor: Multiple influences acting together can produce extreme consequences.

An example might be when one would jump to a conclusion due to both Availability- Misweighting (access to easily available data) and Doubt-Avoidance tendency (tendency to quickly remove doubt).

Success Secrets: Munger's "Misjudgment" Part 8




This post is Part 8: the final post on the series examining Charlie Munger’s “Psychology of Human Misjudgment”. I will attempt to get all 24 Tendencies into a single post soon, for reference purposes. Personally, I intend to follow Munger’s recommendation and make a checklist of these tendencies. Many are subtle, and difficult to recognize because we use these “shortcut algorithms” in our thought processes every day. Taken together, Munger’s perceptive insights form a prism by which we can view our experiences (internal and external) in a new light.

Earlier sections:

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

Part 7

Here are the final three:


23. Munger Descriptor: Twaddle Tendency
Alternate descriptor : Tendency to say meaningless things. At length.

Much is said in our world that is meaningless, and it is often misconstrued to be meaningful. So much is meaningless that the volume of “twaddle” impairs our ability to go about our lives in meaningful ways. Munger exhorts us to make real effort to separate people and ideas that have meaning from this vast overload of people and ideas that, in fact, have little or no meaning or value.

24. Munger Descriptor: Reason-Respecting Tendency
Alternate Descriptor: People tend to comply when a reason, even a bad one, is given.

Munger hastens to remind us that he strongly believes that the use of the word “why”, and the use of a “latticework of theory” are invaluable in assimilating learning and experience. In general, his entire monograph is in favor of finding dispassionate reasoning processes. This particular mention of “Reason-Respecting Tendency” is to remind us that the word “reason” may not, in fact, be an adequate reason for anything, even if someone says it is.

25. Munger Descriptor: Lollapalooza Tendency
Alternate Descriptor: Multiple influences acting together can produce extreme consequences.

An example might be when one would jump to a conclusion due to both Availability- Misweighting (access to easily available data) and Doubt-Avoidance tendency (tendency to quickly remove doubt).

Techtags:

Wednesday, October 24, 2007

Success Secrets: Munger's "misjudgment" Part 7

This is Part 7 of an attempt to summarize the concepts of Charlie Munger’s insightful "Psychology of Human Misjudgment".

Earlier sections:

Part 1

Part 2

Part 3

Part 4

Part 5


Part 6

20. Munger Descriptor: Drug-Misinfluence Tendency
Alternate descriptor: Impaired judgment due to drugs

Munger’s entry on this one is short, but passionate. Drugs are a recipe for failure in life. I’d like to add that, from my on observations, I believe that there are many degrees of judgment impairment due to drug use, and that the ability to focus and concentrate is swiftly, and perhaps permanently impaired by drug use. I suspect that several generations of Americans have lost their edge due to drugs being available freely, and I don’t see a change in that profile anytime soon.

21. Munger Descriptor: Senescence-Misinfluence Tendency
Alternate descriptor: Mental deterioration with age

Mental agility will decline with age, but can be maintained with practice. Munger is, of course, correct: new research continues to come in about using both mental and physical exercise to maintain mental capacity in later years.

23. Munger Descriptor: Authority-Misinfluence Tendency
Alternate descriptor: Irrationally strong obedience to authority

People tend to follow authority, even though this obedience can produce negative results. Literal interpretation can produce tragic (or even darkly humorous, but disastrous) effects. Blind obedience can also produce horrors of immense magnitude (as in the Nazi-created Holocaust).

Techtags:

Tuesday, October 23, 2007

Success Secrets: Munger's "Misjudgment" Part 6

This is Part 6 of an attempt to summarize the concepts of Charlie Munger’s insightful "Psychology of Human Misjudgment".

Earlier sections:

Part 1

Part 2

Part 3

Part 4

Part 5


16. Munger Descriptor: Contrast-Misreaction Tendency
Alternate descriptor: We “read too much into" situations involving contrast, and, conversely, pay too little attention to small changes, just below our level of awareness.

A bad price seems good because it is “on sale” from an even higher price. We accept a bad situation simply because it feels better than a previous, even worse situation. Alternatively, we underestimate the consequences of small changes, as when someone becomes addicted to a bad habit or dangerous substance in small steps, or when one becomes dishonest little by little.

17. Munger Descriptor: Stress-Influence Tendency
Alternate descriptor: Stress can cause semi permanent changes in mental states.

Munger suggests that stress-induced depression can be coped-with, even without drugs, and he further theorizes that high stress can be used as a “brainwashing” and even an “un-brainwashing” tool.

18. Munger Descriptor: Availability-Misweighing tendency
Alternate descriptor: Proximity Effect

The nearness (or proximity) of an influence can unduly magnify that influence, whereas rational thought would not allow such emphasis. This could apply to easily available (but non-nutritious) junk food, ideas in the media that are irrational (but are so prevalent that we tend to believe them more readily), or basing a decision on statistics, although countervailing “common sense” reasons might be unquantifiable.

19. Munger Descriptor: Use-It-Or-Lose-It-Tendency
Alternate descriptor: Decay of unpracticed skills

Munger recommends practice of various intellectual skills,not just in themselves, but because each intellectual skill provides a “latticework of theory” through which to organize experience. Lose ,say, a particular mathematical skill, and you will lose that “doorway” to understanding experience

Techtags:

Sunday, October 21, 2007

Success Secrets: Munger's "Misjudgment" Part 5



This is Part 5 of an attempt to summarize the concepts of Charlie Munger’s insightful "Psychology of Human Misjudgment".

Earlier sections:

Part 1

Part 2

Part 3

Part 4


13 Munger Descriptor: Overoptimism Tendency
Alternate Descriptor: Optimism without rational foundation

Expect failure if plans are not made rationally. Use mathematical probability techniques. Let the mathematics determine whether a business splan is “rosy”. Use the most pessimistic projections.


14. Munger Descriptor: Deprival Superreaction Tendency
Alternate Descriptor: Unusual sensitivity to real or perceived loss

Something perceived as “taken away” (money, power, perks, status, a comfortable situation) is perceived as a much more painful event than if the same status had never occurred.

This is a subtle and powerful observation and, as Munger says, much “ideological” , religious, and bureaucratic conflict may be traceable to this brilliant concept.

15. Munger Descriptor: Social-Proof Tendency
Alternate Descriptor: Irrationally following the example of others

Expect people to use this unfortunate decision-making shortcut. Conformity can lead to financial problems (“keeping up with the Jones’s"), or even international tragedy (when totalitarian and genocidal regimes slowly use social proof to co-opt a society). Munger tells us that the ability to ignore the urge to follow others , when they are wrong, is a key success factor.

Techtags:

Thursday, October 18, 2007

Success Secrets: Scott Young on Task Completion

Scott Young spotlights a crucial success skill in his must-read post: The Art of the Finish: How to Go from Busy to Accomplished. If Woody Allen taught us "ninety-nine percent of success is just showing up", believe me, Scott Young brings us the other one percent and then some. Here is a short excerpt:

"From my experience, the most common trait you will consistently observe in accomplished people is an obsession with completion. Once a project falls into their horizon, they crave, almost compulsively, to finish it. If they’re organized, this might happen in scheduled chunks. If they’re not — like many — this might happen in all-nighters. But they get it done. Fast and consistently."

Scott goes on to describe a project-management system that aids completion-focus while not letting other creative ideas get away. This post is a keeper. Please read it all.

Techtags:

Tuesday, October 16, 2007

Success Master Skills: Iteration

Your phone is not a phone. Your PC is not a PC. And you are not…ok we’ll leave that one for later. But what we think of as objects or products (including that last one), are actually iterations of products. They are “snapshots” of the ongoing development of the idea of a product.

One definition of iteration I like a lot, from the web, is:

Iteration: Repeatedly applying a series of operations to progressively advance towards a solution.

Iteration is crucial for success. Charles Murray, in his monumental work Human Accomplishment , teaches us that the truly great geniuses separate themselves from the merely talented not just by the incredible, almost non-human quality of their output, but by the profuse quantity. Similarly, successful corporations often don’t succeed by doing one “thing”, but by iterating, that is, continually re-introducing and refining, the products and services they sell. Think of Intel, McDonalds, Fedex, or Apple, and it is clear that that , while these companies all began with a groundbreaking concept, it is the decades of iteration, the consistent improvement, refinement, and response to the never-ending feedback of consumers and competitors, as well as continual reexamination of all tools, technologies, and other resources, that truly brands these companies as standouts.

I bring up the concept of iteration because of its relevance to the area of personal success. If we realize that success is not an “event”, but a process, and indeed an open-ended and potentially limitless process, we gain an enormous reserve of power. For instance, many motivational speakers discuss idea that, once a task is begun, all sorts of resources seem to become available. Here is how Scott Berkun, author of The Art Of Project Management , sees it:

"…until you take that step forward and make a decision (“Let’s run with design B!”) you won’t see all the problems and issues. Making decisions…is the only way to force issues and problems to the surface


Iteration is commonplace across the spectrum of human activity:

The industrial concept known as “spiral development” aims to get products out the door, even if they are nor "perfect", so that they can be evaluated in the “real world”, not just in the lab, thus drastically speeding up the improvement process.


The Air Force uses the brief/mission/debrief cycle to improve their capabilities after each mission.

Warren Buffett is said to be constantly searching for more “opportunity cost” …i.e. the highest-value activities he is not yet investing in, so he can improve his record.


So what does iteration mean for us on the level of personal success?

1. It is tragic state when we are frozen in an unchanging idea of self. A person who doesn’t continually change and grow is similar to a telephone from 1959, or a computer from 1979: a quaint, mostly useless pile of outdated and irrelevant ideas and standards. I know way too many people who haven’t changed their core beliefs for decades, although the world had marched on. And the most tragic part, is that their core beliefes about themselves and their own capabilities are the most "frozen" beliefs.

2. There is no “perfect time” to start a project, because, as Berkun tells us in the example above, only by engaging in the project can you even begin to understand what tasks are involved in the project. And most projects are going to unfold and develop as a result of starting them.

3. Each time you discover a new dimension to a project, you multiply the other dimensions by that new dimension, thus geometrically improving your possibilities. You cannot do this unless you are constantly seeking input and growth. Let’s say, for instance, that you’re going to take a public speaking course. In the course they introduce you to methods of standing with good posture, speaking clearly, and explaining your ideas forcefully. Now, you have three different tools that can be disaggregated and used individually, Then one day, you find that people see you as “leadership material”. Now you have a new dimension, leadership, to explore, and you start using your previous three skills in the service of the new skill. You get feedback on your leadership skills, and, perhaps uncover other areas, or dimensions, of skills you want to learn, such as personal organization, motivation, etc and so each acquired skill iterates into other dimensions, in a nonstop pattern of growth and development. As long as you’re willing to iterate, and respond to the feedback of previous iterations, you are going to grow nonstop.

4. When Ben Stein tells us to “stay at the table” until we win, and that even the very most successful people have to struggle each and every day (How Successful People Win ), he is telling us that success is an iterative journey. A game of inches. A marathon. He encourages to think in terms of an unfolding series of better and better results.

5. In a free society, there is no stasis. Things are changing every day. We need to learn to love this. Stock clerks become billionaires. Students become teachers. Truth becomes less true, yielding to new truth. Amateurs become professionals. There is no “that’s the way it is”. Reality is fluid, flowing, responsive.

Now, let’s say you’ve just been examining a previous outcome in your quest for personal success. It may have been an unfortunate outcome. What tools can we apply to improve the next iteration?

Techniques for dealing with sub-optimal outcomes:

1. What components of this outcome did I not expect?


2. What components suggest obvious “fixes”?


3. Is there a reason to give up the project just because of this one outcome, considering all the possible adjustments I can make, and the potential success ahead of me?


4.What results, however small, could I amplify to improve results the next time?


5. What sources of knowledge are available to me to improve the next iteration of this project? People? Books? Articles? Coaches? Friends? Mentors? Family? Spiritual?


6. What organizational tools could I use to improve my outcome next time? Checklists? Notepads? Printouts? Graphs? Charts? Pre-rehearsal? Written agenda?


7. Even though this might have been a negative outcome, as it in any way better than a previous outcome?


8.Now that I have “been through” this outcome, is there a “change of focus”? Should I be focusing on something (slightly or largely) different?

Here’s one other secret about iteration. You can’t lose. You see, if the goal is making each cycle better, and you did something, anything, to make the next attempt better, you actually won. As Vince Lombardi famously said: "We didn't lose the game; we just ran out of time."

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Saturday, October 13, 2007

Success Podcasts - Tesla Motors' Martin Eberhard


FreeVideoCoding.com

Tesla Motors' Martin Eberhard recently spoke at Stanford's Entrepreneurial Thought Leaders series. His talk was extremely honest, and he spoke frankly about some of the lessons he had learned, some of them repeatedly and painfully. Here are the key lessons he mentioned during the talk:

Do something meaningful
Be bold
Think your ideas through
Build your company while you're building your product
Face reality every day
Hire the very best best people
Aggressively follow all leads

As is often the case, the lessons Eberhard discusses an an entrepreneur, can be of service to us in personal progress as well. In particular, the last three items seem to me to be capable of drastically speeding up the process of reaching any of our goals.

Face Reality Every day

Other re-statements of this lesson are:
If I were just starting this project now, would I do it at all?
What would be a better use of my time
Is this the highest and best use of my resources?
Is this working?
When is the last time I sat down and calculated the value flowing from this project?

Hire the Very Best People

If we are talking a bout personal development, we might expand that lesson to
get the highest quality input we can. One way to do that is to discard what Charlie Munger calls "Excessive Self Regard". Simply put, the chances that your own ideas, about virtually any area requiring specific knowledge and or experience, unaided by expert input, are almost certain to be wrong, incomplete, outdated, or in some way overly convenient to you. Find experts, read constantly, and discard often.

In business, the difference between the best and the "not so good" is so huge, that, as Jack Welch often said, it is a service to the hard working, high-output people, to fire the lowest-percentile, and, indeed, it is an albatross to everyone, including stockholders, to keep bad employees on.

In out personal lives, we might consider "firing ourselves" from as much as possible that is outside the realm of our core competencies.

Aggressively Follow All Leads

This may be the single best career advice I have ever heard. The fact is, the world is a vast, incohate sea of probabilities, much like a quantum wave function, that only resolves itself when there is an interaction. Success usually comes from odd intersections of ability and chance. And it may be a one-in-ten shot, so you have to take the ten shots to get the one result. Now, a million at-bats will do nothing if you don't have any batting skills, but percentages multiplied by skill is a superb recipe for success.

Happy motoring.

Techtags:

Friday, October 12, 2007

Success Secrets: Munger's "Misjudgment" Part 4




This post is Part 4 of my examination of Charlie Munger’s “Psychology of Human Misjudgment”.


Part 1

Part 2

Part 3

10: Munger Descriptor: Influence-From-Mere-Association-Tendency
Alternate descriptor: The power of association encourages feeling over thought.

The power of association can influence behavior as when a product is promoted with a lifestyle, military service is promoted with impressive music, a product is “upscaled” (as in coffee with Starbucks). A second type of association occurs when we trick ourselves into repeating a behavior because it succeeded for us “the last time”. Thirdly, we may misjudge people’s abilities because we don’t alike a particular aspect of the person, and “tar” the entire person, or even a whole group of persons , “with the same brush”, although individuals vary widely from groups to which they may belong.

Munger explains to us that we human beings tend to use mental shortcuts that tempt us to avoid “drilling down” from the general to the particular. Another aspect is that our feelings are an older part of our brain anatomy, whereas our rational side is a newer evolutionary tool, that often gets downplayed because it doesn’t “feel” as “true”.

11. Munger Descriptor: Simple Pain-Avoiding Psychological Denial
Alternate Descriptor: Full or Partial Denial of Painful Facts

Expect extremely painful memories or unpleasant facts to be “re-configured” or denied. Expect that people simply find some facts (such as death, failure, chemical dependency) too painful to bear, so they act as if these unpleasant facts do not exist or deny the strength of those facts.

12. Munger Descriptor: Excessive Self-Regard Tendency
Alternate Descriptor: Overestimating one’s uniqueness in any area

We regard anything “like us”, or any decision we make, or anything we own, as “special” because it is something we personally have initiated, approved, etc. People we like, or people “like us”, are “better”, get the benefit of the doubt, etc. Munger always counsels us to search for “disconfirming evidence”. One interpretation: the stronger you “feel” it, the more you should check it before doing it.



Techtags:

Thursday, October 11, 2007

Success Secrets: How to Retire at 50

Freemoneyfinance pointed me to a great article at MSN Money about 3 investors who retired by 50. As Freemoneyfinance summarizes it, these successful investors are:

Allergic to debt.
Acutely aware of the power of time.
More interested in their goal than what the neighbors think
.

The article is terrific. I recommend reading it in it’s entirety , but I think one of the outstanding points the author makes is that there is a key mental orientation that many of these investors made: they enjoy the more “abstract” pleasure of becoming wealthy while being able to endure the outward label of being “different” from their peer group. It takes fortitude to skip the fancy cars, fancy schools, fancy meals, etc, but… imagine the joy of never needing a paycheck again (although the retirees in the article continue to enjoy working).

Please read this article. It just might turn your head around.

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Monday, October 08, 2007

Success Secrets: Munger's "Misjudgment" Part 3



This post is Part 3 of of my examination of Charlie Munger’s “Psychology of Human Misjudgment”.


Part 1

Part 2


7. Munger’s Descriptor: Kantian Fairness Tendency
Alternate descriptor: People in civil societies often behave as they would like others to behave toward them.

Munger notes that this behavior appears to have become much more common after Kant formulated his “Categorical Imperative” . The implication (to my mind) is that human reason can have a civilizing effect.

8. Munger Descriptor:Envy/Jealousy Tendency

Alternate Descriptor: Jealousy and envy are stronger today than we allow ourselves to believe.

This is the “500 pound gorilla in the room” kind of trait that no one talks about, although, as Munger reminds us, it is screamingly apparent in families, universities, and all manner of professional firms. We ignore this trait at our peril.

9. Munger Descriptor: Reciprocation Tendency
Alternate descriptor: Tendency to reciprocate both favors and harm .

Expect reciprocation for favors awarded and for perceived harm done. Feuds can be endless and last for generations. “Turning the other cheek” may be unnatural, and even dangerous, especially in advanced cultures that should want to protect themselves from aggression.

The tendency to reciprocate can be both positive (helping to deepen the bonds of productive relationships) or negative (as when we are led to grant favors that should not be granted, because we have been granted a favor).

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Wednesday, October 03, 2007

Success Secrets: Munger's "Misjudgment" Part 2



Charlie Munger’s work brings to light many of the mind’s “tendency to use oversimplified algorithms” (Munger's words) in decision-making. This series examines Munger’s “Psychology of Human Misjudgment".


4. Munger‘s Descriptor: Doubt-Avoidance Tendency
Alternate Descriptor: Humans often make decisions too quickly for emotional, rather than rational, reasons.

Expect people to make hurried, possibly bad, decisions under stress. Attempt to avoid this tendency when making your own decisions.

5. Munger’s Descriptor: Inconsistency-Avoidance Tendency
Alternate Descriptor: We are habit-driven. We behave in a manner we deem consistent with our identity.

Expect people to be trapped in habits of thought for their lifetime. Expect people to ignore evidence when it is counter to their identity.

To adopt a new (good) habit, use the concept of consistency with the new identity to reinforce the habit. “Fake it until you make it”.

To avoid self-consistency bias, look for disconfirming evidence.

6. Munger’s Descriptor: Curiosity Tendency
Alternate Descriptor: Curiosity Tendency

Curiosity can aid the quest to reduce the other ‘human misjudgments”. Munger’s mention of the less-curious Romans (as opposed to the Greeks) is a reminder that we can gain much practical use from the curiosity of others that have gone before us.


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Tuesday, October 02, 2007

Success Videos - The Inspiration of Jim Rohn




Here is a video collection of short clips by master motivator Jim Rohn. Like Charlie Munger, he has the insights of a long and successful life, and, like Munger, he synthesizes these insights masterfully.

A few of my favorite concepts from this video:

Finding is reserved for those that search

This reminds me of Ben Stein’s concept of Activity and Mobility. You have to get moving. You have to stay active in the pursuit of your goals. Success doesn’t find you, you have do go out and find it.

Seize opportunities quickly

I have seen this concept over and over again in my research, starting with How To Attract Good Luck.

Produce All You Can

I have heard Rohn mention this in many of the programs of his that I have watched. It is a great way to unlock potential. To turn off the inner parent who does not want to be superceded, or the misguided advice of friends who might be envious. A great way also to short-circuit self-sabotage.

Stay The Course…hang in there

This also reminds me of Ben Stein’s remark “stay at the table” meaning, you need a long time to fully realize success. There is really no proof that you will succeed, until you succeed. How long does it take? As long as it takes.

There are many other great snippets of Rohn here, particularly on the subject of communication, and I think that those who do not know Jim Rohn’s work will want to go forward and get hold of his tapes and videos.





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Success Secrets: Vocabulary

In this blog I have often quoted luminaries who mention reading as a key differentiator for lifetime success. But here is quantitative, not merely quantitative evidence.

A fascinating study is highlighted in this post from Litemind. There is a strongly measurable effect of vocabulary upon job status.

From Litemind:

Below are the average results of an extensive vocabulary test, averaged and grouped by hierarchical level:














Please read the whole post, it is fascinating.


Success Secrets: Munger's "Misjudgment" Part 1



This series of posts will be an exploration of Charlie Munger’s Psychology of Human Misjudgment. Munger’s ideas on this subject have continued to deepen and broaden over the years. My goal is to create an accessible summary of these landmark ideas, but nothing substitutes for Munger’s own words. I suggest using the link above to download the pdf. The most recent collection of Munger’s ideas on this subject include 25 concepts. The list here is derived from that numbering.

1. Munger's Descriptor: Reward and Punishment Superresponse Tendency

Alternate Descriptor: Each person responds most strongly to what they view as the strongest incentives and the strongest disincentives.

Expect that people will operate in their own self interest, including doctors, lawyers, brokers, your friends, relatives, employees and employers.

Structure incentives correctly, and you get great results. Structure them incorrectly, even by accident, and expect disaster.

Reflect constantly on the real incentives of any person you are dealing with. “What are they getting out of this?”

2. Munger’s Descriptor: Liking/loving Tendency

Alternate Descriptor: Humans have a natural tendency to like and love, and to want to be liked and loved.

This tendency can be used to mold behavior, good and bad. In other words, this tendency can be a driver of behavior. People will sacrifice their lives for what they love. They will adopt the habits, likes, and dislikes of those they love. And they will ignore the faults of those they love.

Implicit in Munger’s treatment is the concept that we should expect this tendency to override “rational” or other “expected” behavior

3. Munger’s Descriptor: Disliking/Hating Tendency
Alternate descriptor: The tendency to dislike and hate can be used to mold behavior

Hatred can bond people as strongly as love.

Implicit in Munger’s treatment is the concept that we should expect this tendency to override “rational” or other “expected” behavior .









To be continued...


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Success Tools: Mr. Wang on Goal-Setting



I recently came a cross a unique twist on goal-setting at Mr Wang Says So. He recommends writing a page of goals, at one sitting, every day. This is similar to, but still different, from periodic (quarterly or yearly) goal setting, or even Brian Tracy’s recommendation to write your top three goals every day.

I have been trying this technique, and it seems to awaken more brain activity than other methods. For one thing, I am guessing that the time it takes to write a fill page of goals is enough time to biologically activate more brain centers. I also think that exposing the unconscious to so many goals may allow it to “keep in mind” more goals, as opportunities open up during the day. Furthermore, I think the mind generates a wider variety of goals as it “gets in practice” through each days’ writing.

I think this method is well worth trying.


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