Now, when I want to know something, I just learn about it. The habit of figuring something out for yourself is an important thing to develop
— Charlie Munger
People are really crazy about minor decrements down. Huge insanities can come from just subconsciously over-weighing the importance of what you’re losing or almost getting and not getting…
— Charlie Munger
One of prospect theory’s most important contributions to finance is loss aversion, the idea that for most people, losses loom larger than corresponding gains. The empirical evidence suggests we feel losses about two to two-and-a-half times more than we feel gains. Loss aversion is a clear-cut deviation from expected utility theory.”
— Michael Mauboussin
Here’s one truth that perhaps your typical investment counselor would disagree with: if you’re comfortably rich and someone else is getting richer faster than you by, for example, investing in risky stocks, so what?! Someone will always be getting richer faster than you. This is not a tragedy.
—CHARLIE MUNGER, WESCO ANNUAL MEETING, 2000
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…
— Charlie Munger
And proper education is one long exercise in augmentation of high cognition so that our wisdom becomes strong enough to destroy wrong thinking, maintained by resistance to change. As Lord Keynes pointed out about his exalted intellectual group at one of the greatest universities in the world, it was not the intrinsic difficulty of new ideas that prevented their acceptance. Instead, the new ideas were not accepted because they were inconsistent with old ideas in place. 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.”
The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured…
— Charlie Munger
And the great rule that helps here is again from Franklin’s Poor Richard’s Almanack: “An ounce of prevention is worth a pound of cure.” What Franklin is here indicating, in part, is that Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it.
Also tending to be maintained in place by the anti-change tenedency 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. My guess is the anti-change mode was significantly caused by a combination of the following factors:
(1) It facilitated faster decisions when speed of decision was an important contribution to the survival of nonhuman ancestors that were prey.
(2) It facilitated the survival advantage that our ancestors gained by cooperating in groups, which would have been more difficult to do if everyone was always changing responses.
(3) It was the best form of solution that evolution could get to in the limited number of generations between the start of literacy and today’s complex modern life.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.”
Of course, money is now the main reward that drives habits…
— Charlie Munger
A monkey can be trained to seek and work for an intrinsically worthless token, as if it were a banana, if the token is routinely exchangeable for a banana. So it is also with humans working for money—only more so, because human money is exchangeable for many desired things in addition to food, and one ordinarily gains status from either holding or spending it.
Moreover, a rich person will often, through habit, work or connive energetically for more money long after he has almost no real need for more. Averaged out, money is a mainspring of modern civilization, having little precedent in the behavior of nonhuman animals. Money rewards are also intertwined with other forms of reward. For instance, some people use money to buy status and others use status to get money, while still others sort of do both things at the same time.
Although money is the main driver among rewards, it is not the only reward that works. People also change their behavior and cognition for sex, friendship, companionship, advancement in status, and other nonmonetary items.”
