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Charlie Munger – The Psychology of Human Misjudgment

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Re: Charlie Munger – The Psychology of Human Misjudgment

#11
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

Munger's an adherent of a particular value system common among businessmen from the mid-19th -> late-20th century. In this value system, 1) the primary purpose of economic activity is efficiency, producing more with less 2) the purpose of employees is to serve as instruments for their employers to accomplish their business goals and 3) anything that gets in the way of this is by definition evil, and it is not immoral to work around such restrictions for the purposes of increasing efficiency.

Both Patterson and Travis Kalanick are exceptionally virtuous men by this value system. They were ruthless drivers of efficiency, willing to ignore any obstacles in the pursuit of making their businesses bigger and more profitable. Other adherents to this value system include Milton Friedman, Ayn Rand, Bill Gates, John D. Rockefeller, J.P. Morgan, Steve Jobs, and Paul Graham.

By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and those who break those rules are by definition evil and 4) the employee/employer relationship should be a partnership where the employer should provide purpose and direction in accord with the employee's value system, and in return the employee helps the employer accomplish their business goals. Interestingly, both the Left and the Right of an increasingly divided America subscribe to this value system, they just define "self fulfillment and emotional gratification" differently.

The two value systems aren't entirely at odds with each other, but they aim toward entirely different purposes, and so naturally they conflict at several points. When this happens, things that may be considered the height of virtue under one value system are morally abhorrent to another one.

Re: Charlie Munger – The Psychology of Human Misjudgment

#12
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

> "First-conclusion bias". Huge problem with cops. Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes u…

It is a fairly common subterfuge to replace law-enforcement killing blacks statistics with statistics of white-on-black crime. There have been several studies that demonstrate that the likelihood of death from an LEO encounter increases with your melanin content http://www.independent.co.uk/news/world/americas/black-ameri...

Re: Charlie Munger – The Psychology of Human Misjudgment

#13
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

> "First-conclusion bias". Huge problem with cops. Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes u…

>Mind you, those stats are "white men", much less "white men that happen to be policemen"

These stats are on murders as tracked by law enforcement agencies, most of the killing of black people by police officers wouldn't be included.

Re: Charlie Munger – The Psychology of Human Misjudgment

#14
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

> "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders.

You might be over-reading that. Getting ahead relative to others doesn't require explicitly pushing someone else down. If you work on your own and indirectly push everyone else down by inflating whatever metric you measure success by.

A clear example is that modern poor people are far richer than the richest people thousands of years ago. They have fridges and cars, or at least less disease. All those historical people are losers because we won but that's not a bad thing. In absolute terms, we didn't change their status at all.

Re: Charlie Munger – The Psychology of Human Misjudgment

#15
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

Munger's an adherent of a particular value system common among businessmen from the mid-19th -> late-20th century. In this value system, 1) the primary purpose of economic activity is efficiency, producing more with less 2) the purpose of employees is to serve as instruments for their employers to accomplish their business goals and 3) anything that gets in the way of this is by definition evil, and it is not immoral…

> By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and those who break those rules are by definition evil and 4) the employee/employer relationship should be a partnership where the employer should provide purpose and direction in accord with the employee's value system, and in return the employee helps the employer accomplish their business goals. Interestingly, both the Left and the Right of an increasingly divided America subscribe to this value system, they just define "self fulfillment and emotional gratification" differently.

Wow, you are a whole lot less cynical than I am, because when I look at American businesses, the operation of the hyper-growth mindset in practice, and the consequences of policies and practices that assume sustained exponential growth, I don't see these values reflecting back.

Re: Charlie Munger – The Psychology of Human Misjudgment

#16
post #15

Earlier quoted context omitted.

Munger's an adherent of a particular value system common among businessmen from the mid-19th -> late-20th century. In this value system, 1) the primary purpose of economic activity is efficiency, producing more with less 2) the purpose of employees is to serve as instruments for their employers to accomplish their business goals and 3) anything that gets in the way of this is by definition evil, and it is not immoral…

> By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and t…

nostrademons said the value system in America, not among American business leaders.

Re: Charlie Munger – The Psychology of Human Misjudgment

#17

Earlier quoted context omitted.

> "First-conclusion bias". Huge problem with cops. Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes u…

>Mind you, those stats are "white men", much less "white men that happen to be policemen" These stats are on murders as tracked by law enforcement agencies, most of the killing of black people by police officers wouldn't be included.

http://killedbypolice.net/ tracks those; I don't think they have statistics per race, but even if all the people killed were black, I don't think it would change much the graphic.

More than 1000 people killed by cops per year is still absolutely horrifying, of course.

Re: Charlie Munger – The Psychology of Human Misjudgment

#19
post #8

That's a fun read. The section on incentives is useful. But he idolizes Patterson , the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century. "Politics is the art of marshalling hatreds". Munger was way ahead of his time there. "First-conclusion bias". Huge problem with cops. "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too man…

> "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders. You might be over-reading that. Getting ahead relative to others doesn't require explicitly pushing someone else down. If you work on your own and indirectly push everyone…

>>Getting ahead relative to others doesn't require explicitly pushing someone else down.

This might work across the broad economic spectrum. But locally as things apply to you, for one person to succeed others absolutely have to lose. Promotions, college admissions, job interviews all work that way.

So as long as you are a participant to the social code, the society is essentially a giant stack ranking system, where rewards flow in per your rank in ascending order.

Re: Charlie Munger – The Psychology of Human Misjudgment

#20
post #15

Earlier quoted context omitted.

> By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and t…

nostrademons said the value system in America, not among American business leaders.

I think when you look at consumer habits (summed up in household debt, https://en.wikipedia.org/wiki/Household_debt), there is an undertone of overconsumption that runs in parallel with the hypergrowth mindset. Consumption hasn't slowed down, while wages have. Household debt and national debt follow scarily similar arcs.
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