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Charlie Munger – The Psychology of Human Misjudgment

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Re: Charlie Munger – The Psychology of Human Misjudgment

#21

Post by peterwwillis »

titzer wrote: post #15
nostrademons wrote: post #11

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…

They don't, because the purpose of capitalism is to exponentially increase profits. Even if you want to give employees more money so they can buy the products they make and strengthen the economy that enables your corporation, at some point the true purpose of capitalism (ABC - always be capitalizin') will reach a point where all the money is either held by the corporation or the employees, and the only way to increase profits is to take it from the employees. Which is why employee pay stagnates while corporate profits zoom sky high.

Corporations do not value employees any more than the man turning a crank values the cogs.

Re: Charlie Munger – The Psychology of Human Misjudgment

#22

Post by icebraining »

titzer wrote: post #20
icebraining wrote: post #16

Earlier quoted context omitted.

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.

Overconsumption seems to perfectly compatible with "the primary purpose of life [being] self-fulfillment and emotional gratification".

Re: Charlie Munger – The Psychology of Human Misjudgment

#23

Post by scandox »

> ordinarily when you try to use your knowledge of psychological tendencies in the artful manipulation of someone whose trust you need, you will be making both a moral and prudential error. The moral error is obvious. The prudential error comes because many intelligent people, targeted for conscious manipulation are likely to figure out what you are trying to do and resent your action.

Seems to me then the obvious moral error extends to less intelligent (so regarded) individuals and to groups of individuals of all stripes. Which presumably means Mr Munger has never utilised the methods he has researched so digligently.

Re: Charlie Munger – The Psychology of Human Misjudgment

#24

Post by adventured »

peterwwillis wrote: post #21
titzer wrote: 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…

They don't, because the purpose of capitalism is to exponentially increase profits. Even if you want to give employees more money so they can buy the products they make and strengthen the economy that enables your corporation, at some point the true purpose of capitalism (ABC - always be capitalizin') will reach a point where all the money is either held by the corporation or the employees, and the only way to increa…

> They don't, because the purpose of capitalism is to exponentially increase profits.

The purpose of Capitalism is free-association based capital allocation for generating a profit, not to exponentially increase profit. There is no arbitrary outsized multiplication definition attached, nor is there an arbitrary small level of profit under which it's no longer considered Capitalism.

Costco and Walmart are blatantly Capitalist entities, they operate with minuscule 2-3% net income margins.

Re: Charlie Munger – The Psychology of Human Misjudgment

#25

Post by rco8786 »

nostrademons wrote: post #11
Animats wrote: 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…

> the dominant value system in America today

Certainly not. You described the value system dominant in many European countries, but certainly not the one in the USA.

Re: Charlie Munger – The Psychology of Human Misjudgment

#26

Post by dragonwriter »

nostrademons wrote: post #11
Animats wrote: 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

There isn't really one dominant one, but none of those anywhere near that mark are even remotely like your description.

You seem to have confused the fact that several different value systems share a limited tolerance for value systems with differing life goals with them all being a single value system with a highly subjective life goal as a central plank.

Such a value system exists, too, but is by no means dominant.

Re: Charlie Munger – The Psychology of Human Misjudgment

#28

Post by melling »

theyregreat wrote: post #7
JamesLeonis wrote: post #6

Earlier quoted context omitted.

The most readable copy I have. http://tarangshah.com/to-read/MungerMisjudgement.html

Thanks. I hate these pseudo-PDF, book shovelware sites that paywall/proprietarize/socalize content to be useless on readers and generally get in the way.

Is there a copyright? Can this be ocr’ed?

Re: Charlie Munger – The Psychology of Human Misjudgment

#29

Post by peterwwillis »

adventured wrote: post #24
peterwwillis wrote: post #21

Earlier quoted context omitted.

They don't, because the purpose of capitalism is to exponentially increase profits. Even if you want to give employees more money so they can buy the products they make and strengthen the economy that enables your corporation, at some point the true purpose of capitalism (ABC - always be capitalizin') will reach a point where all the money is either held by the corporation or the employees, and the only way to increa…

> They don't, because the purpose of capitalism is to exponentially increase profits. The purpose of Capitalism is free-association based capital allocation for generating a profit, not to exponentially increase profit. There is no arbitrary outsized multiplication definition attached, nor is there an arbitrary small level of profit under which it's no longer considered Capitalism. Costco and Walmart are blatantly Ca…

> they operate with minuscule 2-3% net income margins

Which isn't evidence of the aforementioned point. I'll grant you "exponential" isn't mathematically correct - it's more a turn of phrase. But the profit margins here are strategic.

Costco's gross income per square foot is much higher than Walmart's while their margin is half that of Walmart's. Costco is more valuable, and makes less profit. This is because Costco's aim is to provide the best value for its members [whom usually have more disposable income]. It does this by jockeying for the best bulk price, increasing efficiency, and providing good pay and benefits to its workers. Costco is a shining example of the idea of the corporation being a partner with the employees.

Walmart's aim is to control markets, and does so by eliminating the potential for price competition and then using its buying power to force sellers to bow to its whims. Costco could make much more profit by treating its workers the way Walmart does, but chooses not to, because its value proposition is different.

Costco will also probably not be able to compete for long, not because it isn't valued well, but because Amazon and Walmart will eventually take over every remaining obstacle to the consumer's wallet. Walmart is also slowly increasing its revenue per square foot so it doesn't have to keep fighting a losing battle online.

Re: Charlie Munger – The Psychology of Human Misjudgment

#30

Post by HiroshiSan »

Can someone explain this line to me:

"As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort."

Is he talking about conceptual understanding vs rote memorization? What theory is he talking about?

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