Poor Charlie’s Almanack

Franklin used his self-made wealth to achieve financial independence so he could concentrate on societal improvement. (Location 350)
My dad often used the forum of the family dinner table to try to educate his children. His favorite educational tools were the Morality Tale, in which someone faced an ethical problem and chose the correct path, and the Downward Spiral Tale, in which someone made the wrong choice and suffered an inevitable series of catastrophic personal and professional losses. (Location 370)
I remember the story my dad told his kids, then ranging from age 5 to 25, about a financial officer at one of his companies who made (Location 376)
mistake that resulted in the loss of hundreds of thousands of dollars to the company. As soon as this officer realized his mistake, he went to the president of the company and told him about it. My dad told us that the president then said, “This was a terrible mistake, and we don’t want you ever to make another one like it. But people make mistakes, and we can forgive that. You did the right thing, which was to admit your mistake. If you had tried to hide the mistake, or cover it up for even a short time, you would be out of this company. As it is, we’d like you to stay.” I think back on this story every time I hear of yet another government official who chose the cover-up instead of the honest confession after making a mistake. (Location 377)
My father’s hands, gesturing alongside every colorful joke and guiding story, have molded me as surely as a sculptor’s. I can be nothing but glad, and grateful, for the touch of my father’s hands in mine, and in my son’s. (Location 463)
Much of Franklin’s success was due to the essential nature of the man—most especially his appetite for hard work, but also his insatiable curiosity and patient demeanor. Above all, he possessed a quick and willing mind that enabled him to easily master each new field of endeavor he chose to undertake. It is not surprising that Charlie Munger considers Franklin his greatest hero, for Munger is also largely self-taught and shares many of Franklin’s unique characteristics. Like Franklin, Charlie has made himself into a grandmaster of preparation, patience, discipline, and objectivity. He has parlayed these attributes into great success in both his personal and business endeavors, especially in his investing. (Location 524)
Buffett once said, “Charlie can analyze and evaluate any kind of deal faster and more accurately than any man alive. He sees any valid weakness in 60 seconds. He is a perfect partner.” (Location 530)
Not finding any existing approach adequate to the task, Charlie painstakingly created his own largely self-taught system. The “self-taught” statement is no exaggeration; he once said, “To this day, I have never taken any course, anywhere, in chemistry, economics, psychology, or business.” And yet these disciplines, especially psychology, form the foundation upon which his system is built. (Location 561)
Charlie counts preparation, patience, discipline, and objectivity among his most fundamental guiding principles. (Location 569)
When faithfully adhered to, these traits result in one of the best-known Munger characteristics: not buying or selling very often. (Location 570)
In his view, a portfolio of three companies is plenty of diversification. Accordingly, Charlie is willing to commit uncommonly high percentages of his investment capital to individual, “focused” opportunities. (Location 574)
Charlie strives to reduce complex situations to their most basic, unemotional fundamentals. Yet, within this pursuit of rationality and simplicity, he is careful to avoid what he calls physics envy, the common human craving to reduce enormously complex systems (such as those in economics) to one-size-fits-all Newtonian formulas. Instead, he faithfully honors Albert Einstein’s admonition: “A scientific theory should be as simple as possible, but no simpler.” Or, in his own words: “What I’m against is being very confident and feeling that you know, for sure, that your particular action will do more good than harm. You’re dealing with highly complex systems wherein everything is interacting with everything else.” (Location 592)
I’ve gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain, at a subconscious level, is automatically doing these things—which, by and large, are useful but which often misfunction? (Location 603)
“Quickly eliminate the big universe of what not to do; follow up with a fluent, multidisciplinary attack on what remains; then act decisively when, and only when, the right circumstances appear.” (Location 611)
Is it worth the effort to develop and adhere to such an approach? Charlie seems to think so: “It’s kind of fun to sit there and outthink people who are way smarter than you are because you’ve trained yourself to be more objective and more multidisciplinary. Furthermore, there is a lot of money in it, as I can testify from my own personal experience.” (Location 612)
To stay within these circles, he first applies a basic, overall screen, designed to limit his investment field to only “simple, understandable candidates.” As he says, “We have three baskets for investing: yes, no, and too tough to understand.” (Location 618)
To identify potential “yes” candidates, Charlie looks for an easy-to-understand, dominant business franchise that can sustain itself and thrive in all market environments. Understandably, few companies survive this first cut. Many investor favorites such as pharmaceuticals and technology, for example, go straight to the “too-tough-to-understand” basket. Heavily promoted “deals” and IPOs earn immediate nos. Those that do survive this first winnowing are subjected to the screens and filters of Charlie’s mental-models approach. The process is intense and Darwinian but also efficient. (Location 620)
Above all, he attempts to assess and understand competitive advantage in every respect—products, markets, trademarks, employees, distribution channels, societal trends, and so on—and the durability of that advantage. Charlie refers to a company’s competitive advantage as its moat: the virtual physical barrier it presents against incursions. (Location 641)
“a great business at a fair price is superior to a fair business at a great price.” (Location 650)
While poor outcomes are excusable in the Munger–Buffett world—given the fact that some outcomes are outside of their control—sloppy preparation and decision-making are never excusable because they are controllable. (Location 668)
On those relatively few occasions when all the circumstances are just right and Charlie does invest, he will likely make a large, decisive bet. He does not pick around the edges, take initial positions, or make small, speculative investments. Such behavior implies uncertainty, and Charlie’s moves, few as they are, are anything but uncertain. As he says, he practices “extreme patience combined with extreme decisiveness.” (Location 670)
we see the important role played by the right kinds of temperamental qualities: self-discipline, patience, calm, independence. Charlie’s level of investment performance is arguably impossible without them. (Location 675)
What makes a great business model for Charlie? His recommended reading materials provide some guidance. Guns, Germs, and Steel, The Selfish Gene, Ice Age, and Darwin’s Blind Spot all have a certain theme: a focus on the issue of competitive destruction and an examination of why some entities are nevertheless able to adapt, survive, and even dominate over time. (Location 676)
How many investors ever consider, as Charlie routinely does, such a broad and sophisticated spectrum of factors? To name but a few, he routinely considers factors such as conversion, i.e., how the laws of thermodynamics intersect with laws of economics (for instance, how paper and petroleum become a newspaper delivered to a front door); psychological tendencies and incentives (notably the extreme behavioral pressures they create, both good and bad); and fundamental sustainability over time (the constant and often deadly interplay between positive factors such as moats and the ravages of competitive destruction). (Location 681)
Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day. More important than the will to win is the will to prepare. (Location 702)
If you want to get smart, the question you have to keep asking is “Why, why, why?” (Location 704)
Acknowledging what you don’t know is the dawning of wisdom. (Location 705)
Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat. Guard against the effects of hubris and boredom. (Location 727)
Face your big troubles, don’t sweep them under the rug. (Location 729)
In the end, it comes down to Charlie’s most basic guiding principles, his fundamental philosophy of life: Preparation. Discipline. Patience. Decisiveness. (Location 733)
Like his hero, Benjamin Franklin, Charlie Munger painstakingly developed and perfected unique approaches to personal and business endeavors. Through these methods, and through the development and maintenance of sound, lifelong habits, he has achieved extraordinary success. (Location 741)
Carson’s prescription for sure misery included: Ingesting chemicals in an effort to alter mood or perception Envy Resentment (Location 790)
While susceptibility varies, addiction can happen to any of us through a subtle process where the bonds of degradation are too light to be felt until they are too strong to be broken. And yet, I have yet to meet anyone, in over six decades of life, whose life was worsened by fear and avoidance of such a deceptive pathway to destruction. (Location 795)
cannot here pass by a reference to a life described as “wonderful so far” without reinforcing the “so far” aspects of the human condition by repeating the remark of Croesus,5 once the richest king in the world. Later, in ignominious captivity, as he prepared to be burned alive, he said, “Well now do I remember the words of the historian Solon: ‘No man’s life should be accounted a happy one until it is over.’” My second prescription for misery is to learn everything you possibly can from your own experience, minimizing what you learn vicariously from the good and bad experiences of others, living and dead. This prescription is a sure-shot producer of misery and second-rate achievement. (Location 816)
The other aspect of avoiding vicarious wisdom is the rule of not learning from the best work done before yours. The prescription is to become as non-educated as you reasonably can. (Location 826)
My third prescription to you for misery is to go down and stay down when you get your first, second, or third severe reverse in the battle of life. Because there is so much adversity out there, even for the lucky and wise, this will guarantee that, in due course, you will be permanently mired in misery. (Location 832)
What Carson did was to approach the study of how to create X by turning the question backward—that is, by studying how to create non-X. The great algebraist Jacobi had exactly the same approach as Carson and was known for his constant repetition of one phrase: “Invert, always invert.” It is in the nature of things, as Jacobi knew, that many hard problems are best solved only when they are addressed backward. (Location 840)
It is my opinion, as a certified biography nut, that Charles Robert Darwin10 would have ranked near the middle of the Harvard School graduating class of 1986. Yet he is now famous in the history of science. This is precisely the type of example you should learn nothing from if bent on minimizing your results from your own endowment. (Location 846)
In contrast, most people early achieve and later intensify a tendency to process new and disconfirming information so that any original conclusion remains intact. They become people of whom Philip Wylie observed, “You couldn’t squeeze a dime between what they already know and what they will never learn.” (Location 851)
Einstein said that his successful theories came from “curiosity, concentration, perseverance, and self-criticism.” And by self-criticism, he meant the testing and destruction of his own well-loved ideas. (Location 855)
now believe even more strongly that 1) reliability is essential for progress in life and 2) while quantum mechanics is unlearnable for a vast majority, reliability can be learned to great advantage by almost anyone. (Location 864)
What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. (Location 890)
You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and fail in life. You’ve got to hang experience on a latticework of models in your head. (Location 892)
It’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” And, of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models. And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines. (Location 897)
First, there’s mathematics. Obviously, you’ve got to be able to handle numbers and quantities—basic arithmetic. And the great useful model, after compound interest, is the elementary math of permutations and combinations. (Location 905)
At Harvard Business School, the great quantitative thing that bonds the first year class together is what they call decision tree theory. All they do is take high school algebra and apply it to real life problems. And the students love it. They’re amazed to find that high school algebra works in life. (Location 912)
If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one legged man in an ass kicking contest. You’re giving a huge advantage to everybody else. One of the advantages of a fellow like Buffett, whom I’ve worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations. (Location 920)
you have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. (Location 923)
had another rule, from psychology—which, if you’re interested in wisdom, ought to be part of your repertoire, like the elementary mathematics of permutations and combinations. His rule for all the Braun Company’s communications was called the five Ws: You had to tell who was going to do what, where, when, and why. And if you wrote a letter or directive in the Braun Company telling somebody to do something and you didn’t tell him why, you could get fired. In fact, you would get fired if you did it twice. (Location 936)
“Why, why, why?,” if you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply. Even if they don’t understand your reason, they’ll be more likely to comply. So there’s an iron rule that just as you want to start getting worldly wisdom by asking “Why, why, why?,” in communicating with other people about everything, you want to include why, why, why. Even if it’s obvious, it’s wise to stick in the why. (Location 941)
Then, when you get into psychology, of course, it gets very much more complicated. But it’s an ungodly important subject if you’re going to have any worldly wisdom. And the reason why is that the perceptual apparatus of man has shortcuts in it. The brain cannot have unlimited circuitry. So someone who knows how to take advantage of those shortcuts and cause the brain to miscalculate in certain ways can cause you to see things that aren’t there. (Location 961)
And so, just as a man working with a tool has to know its limitations, a man working with his cognitive apparatus has to know its limitations. And this knowledge, by the way, can be used to control and motivate other people. (Location 967)
The elementary part of psychology—the psychology of misjudgment, as I call it—is a terribly important thing to learn. There are about 20 little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important. Terribly smart people make totally bonkers mistakes by failing to pay heed to it. In fact, I’ve done it several times during the last two or three years in a very important way. You never get totally over making silly mistakes. (Location 973)
Pascal said, “The mind of man at one and the same time is both the glory and the shame of the universe.” And that’s exactly right. It has this enormous power. However, it also has these standard misfunctions that often cause it to reach wrong conclusions. It also makes man extraordinarily subject to manipulation by others. (Location 977)
Just as in an ecosystem, people who narrowly specialize can get terribly good at occupying some little niche. Just as animals flourish in niches, people who specialize in the business world—and get very good because they specialize—frequently find good economics that they wouldn’t get any other way. (Location 990)
Just doing something complicated in more and more volume enables human beings, who are trying to improve and are motivated by the incentives of capitalism, to do it more and more efficiently. The very nature of things is that if you get a whole lot of volume through your operation, you get better at processing that volume. That’s an enormous advantage. And it has a lot to do with which businesses succeed and fail. (Location 995)
So when TV came in, the branded companies that were already big got a huge tailwind. Indeed, they prospered and prospered and prospered until some of them got fat and foolish, which happens with prosperity, at least to some people. And your advantage of scale can be an informational advantage. If I go to some remote place, I may see Wrigley chewing gum alongside Glotz’s chewing gum. Well, I know that Wrigley is a satisfactory product whereas I don’t know anything about Glotz’s. So if one is 40¢ and the other is 30¢, am I going to take something I don’t know and put it in my mouth—which is a pretty personal place, after all—for a lousy dime? So, in effect, Wrigley, simply by being so well known, has advantages of scale—what you might call an informational advantage. (Location 1007)
We are all influenced—subconsciously and, to some extent, consciously—by what we see others do and approve. Therefore, if everybody’s buying something, we think it’s better. We don’t like to be the one guy who’s out of step. Again, some of this is at a subconscious level and some of it isn’t. Sometimes, we consciously and rationally think, “Gee, I don’t know much about this. They know more than I do. Therefore, why shouldn’t I follow them?” (Location 1014)
So occasionally, scaling down and intensifying gives you the big advantage. Bigger is not always better. (Location 1042)
CBS provides an interesting example of another rule of psychology, namely Pavlovian association.17 If people tell you what you really don’t want to hear, what’s unpleasant, there’s an almost automatic reaction of antipathy. You have to train yourself out of it. It isn’t foredestined that you have to be this way. But you will tend to be this way if you don’t think about it. (Location 1060)
He played the chain store game harder and better than anyone else. [Sam] Walton invented practically nothing. But he copied everything anybody else ever did that was smart—and he did it with more fanaticism and better employee manipulation. So he just blew right by them all. (Location 1085)
But at any rate, it’s an interesting model of how the scale of things and fanaticism combine to be very powerful. And it’s also an interesting model on the other side—how, with all its great advantages, the disadvantages of bureaucracy did such terrible damage to Sears, Roebuck. Sears had layers and layers of people it didn’t need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect. (Location 1096)
When technology moves as fast as it does in a civilization like ours, you get a phenomenon that I call competitive destruction. You know, you have the finest buggy whip factory, and all of a sudden, in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you’re dead—you’re destroyed. It happens again and again and again. (Location 1152)
When you’re an early bird, there’s a model that I call surfing—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows. But people get long runs when they’re right on the edge of the wave, whether it’s Microsoft or Intel or all kinds of people, including National Cash Register21 in the early days. The cash register was one of the great contributions to civilization. It’s a wonderful story. [John Henry] Patterson was a small retail merchant who didn’t make any money. One day, somebody sold him a crude cash register, which he put into his retail operation. And it instantly changed from losing money to earning a profit because it made it so much harder for the employees to steal. But Patterson, having the kind of mind that he did, didn’t think, “Oh, good for my retail business.” He thought, “I’m going into the cash register business.” And, of course, he created National Cash Register. And he surfed. He got the best distribution system, the biggest collection of patents, and the best of everything. He was a fanatic about everything important as the technology developed. (Location 1155)
In a long life, you can expect to profit heavily from at least a few of those opportunities if you develop the wisdom and will to seize them. At any rate, surfing is a very powerful model. (Location 1167)
So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence. (Location 1175)
It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it—who look and sift the world for a mispriced bet—that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple. (Location 1233)
you can get very remarkable investment results if you think more like a winning pari mutuel player. Just think of it as a heavy-odds against game full of bullshit and craziness with an occasional mispriced something or other. And you’re probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It’s just that simple. (Location 1243)
For example, Graham didn’t want to ever talk to management. And his reason was that, like the best sort of professor aiming his teaching at a mass audience, he was trying to invent a system that anybody could use. And he didn’t feel that the man in the street could run around and talk to management and learn things. (Location 1312)
[Most investment managers are] in a game where the clients expect them to know a lot about a lot of things. We didn’t have any clients who could fire us at Berkshire Hathaway. So we didn’t have to be governed by any such construct. And we came to this notion of finding a mispriced bet and loading up when we were very confident that we were right. So we’re way less diversified. And I think our system is miles better. (Location 1323)
And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times. You’re much more likely to do well if you start out to do something feasible instead of something that isn’t feasible. Isn’t that perfectly obvious? How many of you have 56 brilliant insights in which you have equal confidence? Raise your hands, please. How many of you have two or three insights that you have some confidence in? I rest my case. (Location 1335)
How do you get into these great companies? One method is what I’d call the method of finding them small—get ’em when they’re little. (Location 1346)
If you sit on your ass for long, long stretches in great companies, you can get a huge edge from nothing but the way income taxes work. (Location 1372)
Anytime somebody offers you a tax shelter from here on in life, my advice would be don’t buy it. In fact, anytime anybody offers you anything with a big commission and a 200 page prospectus, don’t buy it. (Location 1379)
call it the cancer surgery formula. They look at this mess, and they figure out if there’s anything sound left that can live on its own if they cut away everything else. And if they find anything sound, they just cut away everything else. Of course, if that doesn’t work, they liquidate the business. But it frequently does work. (Location 1416)
What should a young person look for in a career? I have three basic rules—meeting all three is nearly impossible, but you should try anyway: Don’t sell anything you wouldn’t buy yourself. Don’t work for anyone you don’t respect and admire. Work only with people you enjoy. (Location 1478)
What overall life advice do you have for young people? Spend each day trying to be a little wiser than you were when you woke up. (Location 1482)
Slug it out one inch at a time, day by day, and at the end of the day—if you live long enough—like most people, you will get out of life what you deserve. Life and its various passages can be hard, brutally hard. The three things I have found helpful in coping with its challenges are: Have low expectations. Have a sense of humor. Surround yourself with the love of friends and family. Above all, live with change and adapt to it. (Location 1484)
what you need is a latticework of mental models in your head. And you hang your actual experience and your vicarious experience that you get from reading and so forth on this latticework of powerful models. (Location 1506)
I would argue that academia has a lot to teach about worldly wisdom and that the best academic values really work. (Location 1519)
Similarly, I’ve told you to think forward and backward. Well, great declarers in bridge think, “How can I take the necessary winners?” But they think it through backward, too: “What could possibly go wrong that could cause me to have too many losers?” Both methods of thinking are useful. So in the game of life, get the needed models into your head and think it through forward and backward. What works in bridge will work in life. (Location 1533)
And it’s kind of fun to sit there and outthink people who are way smarter than you are because you’ve trained yourself to be more objective and multidisciplinary. Furthermore, there’s a lot of money in it—as I can testify from my own personal experience. (Location 1545)
Okay. We’ve been through some of the general ideas in the search for worldly wisdom. And now I want to turn to something even more extreme and peculiar than the talk I’ve already given you. Of all the models that people ought to have in useful form and don’t, perhaps the most important lie in the area of psychology. (Location 1590)
There’s a very interesting history if you take Warren Buffett as an example of worldly wisdom. Warren adored his father, who was a wonderful man. But Warren’s father was a very heavy ideologue—right wing, it happened to be—who hung around with other very heavy ideologues—right wing, naturally. Warren observed this as a kid, and he decided that ideology was dangerous and that he was going to stay a long way away from it. And he has throughout his whole life. That has enormously helped the accuracy of his cognition. (Location 1609)
And life is one damn relatedness after another. It’s all right to think that, on balance, you suspect that civilization is better if it lowers the minimum wage or raises it. Either position is okay. But being totally sure on issues like that with a strong, violent ideology, in my opinion, turns you into a lousy thinker. So beware of ideology-based mental misfunctions. (Location 1619)
Most professors solve this problem, in effect, by assuming “If I can’t demonstrate it with my experiments, then it doesn’t exist.” However, obviously, that’s asinine. If something is very important but can’t be perfectly and precisely demonstrated because of ethical constraints, you can’t just treat it like it doesn’t exist. You have to do the best you can with it, with such evidence as is available. (Location 1663)
But English sailors were a tough, cranky, and dangerous bunch in that day. They hated “krauts.” And they were used to their standard food and booze. So how do you get such English sailors to eat sauerkraut? Well, Cook didn’t want to tell ’em that he was doing it in the hope it would prevent scurvy—because they might mutiny and take over the ship if they thought that he was taking them on a voyage so long that scurvy was likely. So here’s what he did: Officers ate at one place where the men could observe them. And for a long time, he served sauerkraut to the officers but not to the men. And then, finally, Captain Cook said, “Well, the men can have it one day a week.” In due course, he had the whole crew eating sauerkraut. (Location 1688)
It can’t be emphasized too much that issues of morality are deeply entwined with worldly wisdom considerations involving psychology. For example, take the issue of stealing. A very significant fraction of the people in the world will steal if a) it’s very easy to do and b) there’s practically no chance of being caught. And once they start stealing, the consistency principle—which is a big part of human psychology—will soon combine with operant conditioning to make stealing habitual. (Location 1700)
It’s very, very important to create human systems that are hard to cheat. Otherwise, you’re ruining your civilization, because these big incentives will create incentive-caused bias and people will rationalize that bad behavior is okay. Then, if somebody else does it, now you’ve got at least two psychological principles: incentive-caused bias plus social proof. Not only that but you get Serpico41 effects: If enough people are profiting in a general social climate of doing wrong, then they’ll turn on you and become dangerous enemies if you try and blow the whistle. It’s very dangerous to ignore these principles and let slop creep in. Powerful psychological forces are at work for evil. (Location 1705)
Let’s say you have a desire to do public service. As a natural part of your planning, you think in reverse and ask, “What can I do to ruin our civilization?” That’s easy. If what you want to do is to ruin your civilization, just go to the legislature and pass laws that create systems wherein people can easily cheat. It will work perfectly. (Location 1712)
So it’s much better to let some things go uncompensated—to let life be hard—than to create systems that are easy to cheat. (Location 1719)
And no one could tell them, “You can’t do it anymore.” Incidentally, that’s Pavlovian mere association, too. When people get bad news, they hate the messenger. (Location 1726)
This sort of tragedy is caused by letting the slop run. You must stop slop early. It’s very hard to stop slop and moral failure if you let it run for a while. (Location 1731)
And we only find a few, maybe one or two a year. We have no system for having automatic good judgment on all investment decisions that can be made. Ours is a totally different system. We just look for no-brainer decisions. As Buffett and I say over and over again, we don’t leap 7-foot fences. Instead, we look for 1-foot fences with big rewards on the other side. So we’ve succeeded by making the world easy for ourselves, not by solving hard problems. (Location 1747)
However, both Warren and I are very good at changing our prior conclusions. We work at developing that facility because without it, disaster often comes. (Location 1774)
Why should we want to play a competitive game in a field where we have no advantage—maybe a disadvantage—instead of in a field where we have a clear advantage? (Location 1783)
In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke. You’ve made an enormous commitment to something. You’ve poured effort and money in. And the more you put in, the more the whole consistency principle makes you think, “Now it has to work. If I put in just a little more, then it’ll work.” And deprival-superreaction syndrome also comes in: You’re going to lose the whole thing if you don’t put in a little more. People go broke that way because they can’t stop, rethink, and say, “I can afford to write this one off and live to fight again. I don’t have to pursue this thing as an obsession, in a way that will break me.” (Location 1800)
don’t like to be with many of the types who hang around card parlors and so forth. On the other hand, I do like the manly art of wagering, so to speak. And I like light social gambling among friends. But I do not like the professional gambling milieu. (Location 1834)
sometimes tell my friends, “I’m doing the best I can. But I’ve never grown old before. I’m doing it for the first time, and I’m not sure that I’ll do it right.” (Location 1860)
I am trying to teach you something. When you don’t know and you don’t have any special competence, don’t be afraid to say so. (Location 1900)
And to one degree or another, all of you were born with the gift, and you can hone it too. (Location 1945)
People adapt to a changing litigation climate. They have various ways of doing it. That’s how it’s always been and how it’s always going to be. (Location 2006)
When I gave Talk Three in 1996, I argued that intense political animosity should be avoided because it causes much mental malfunction, even in brilliant brains. Since then, political animosity has increased greatly, both on the left and the right, with sad effects on the ability of people to recognize reality, exactly as I would have expected. (Location 2144)
Instead, what works best for me in coping with all disappointment is what I call the Jewish method: humor. (Location 2154)
The first helpful notion is that it is usually best to simplify problems by deciding big no-brainer questions first. (Location 2179)
The best way to avoid envy, as recognized by Aristotle,54 is to plainly deserve the success we get. (Location 2303)
incentive-caused bias, a natural cognitive drift toward the conclusion that what is good for the professional is good for the client and the wider civilization; and 2) man-with-a-hammer tendency, with the name taken from the proverb “To a man with only a hammer, every problem tends to look pretty much like a nail.” (Location 2427)
1. achieved a massive multidisciplinary synthesis with less time in formal education than is now available to our numerous brilliant young, and 2) thus become better performers in their own disciplines, not worse, despite diversion of learning time to matter outside the normal coverage of their own disciplines. (Location 2484)
This simple idea may appear too obvious to be useful, but there is an old two-part rule that often works wonders in business, science, and elsewhere: 1) Take a simple, basic idea and 2) take it very seriously. (Location 2564)
Smart, hardworking people aren’t exempted from professional disasters from overconfidence. (Location 2656)
Furthermore, all the good in the world is not done by foundation donations. Much more good is done through the ordinary business operations of the corporations in which the foundations invest. (Location 2704)
So economics should emulate physics’ basic ethos, but its search for precision in physics-like formulas is almost always wrong in economics. (Location 3275)
Keynes said, “It’s not bringing in the new ideas that’s so hard. It’s getting rid of the old ones.” And Einstein said it better, attributing his mental success to “curiosity, concentration, perseverance, and self-criticism.” By self-criticism, he meant becoming good at destroying your own best-loved and hardest-won ideas. If you can get really good at destroying your own wrong ideas, that is a great gift. (Location 3584)
Now, occasionally you will find a perfect rogue of a person who dies rich and widely known. But mostly these people are fully understood as despicable by the surrounding civilization. If the cathedral is full of people at the funeral ceremony, most of them are there to celebrate the fact that the person is dead. (Location 3647)
I constantly see people rise in life who are not the smartest, sometimes not even the most diligent. But they are learning machines. They go to bed every night a little wiser than they were that morning. And boy, does that habit help, particularly when you have a long run ahead of you. (Location 3663)
My advice to you is to be better than I was at keeping insights hidden. (Location 3696)
The way complex adaptive systems work, and the way mental constructs work, problems frequently become easier to solve through inversion. If you turn problems around into reverse, you often think better. (Location 3714)
Well, there once was a man who became the most famous composer in the world, but he was utterly miserable most of the time. One of the reasons was that he always overspent his income. That was Mozart. (Location 3744)
Every time you find you’re drifting into self-pity, whatever the cause, even if your child is dying of cancer, self-pity is not going to help. (Location 3752)
“If you would persuade, appeal to interest, not to reason.” The self-serving bias of man is extreme, and should have been used in attaining the correct outcome. (Location 3766)
Perverse associations are also to be avoided. You particularly want to avoid working directly under somebody you don’t admire and don’t want to be like. It’s dangerous. We’re all subject to control to some extent by authority figures, particularly authority figures who are rewarding us. Dealing properly with this danger requires both some talent and will. (Location 3775)
One also needs checklist routines. They prevent a lot of errors, and not just for pilots. You should not only possess wide-ranging elementary wisdom but also go through mental checklist routines in using it. There is no other procedure that will work as well. Another idea that I found important is that maximizing non-egality will often work wonders. (Location 3783)
I think the game of competitive life often requires maximizing the experience of the people who have the most aptitude and the most determination as learning machines. If you want the very highest reaches of human achievement, that’s where you have to go. (Location 3789)
protagonist. In this world, I think we have two kinds of knowledge. One is Planck knowledge, that of the people who really know. They’ve paid the dues, they have the aptitude. Then we’ve got chauffeur knowledge. They have learned to prattle the talk. They may have a big head of hair. They often have a fine timbre in their voices. They make a big impression. But in the end, what they’ve got is chauffeur knowledge masquerading as real knowledge. (Location 3799)
Another thing to cope with is that life is very likely to provide terrible blows, unfair blows. Some people recover and others don’t. (Location 3816)
For instance, economists, speaking from the employer’s point of view, have long had a name for the natural results of incentive-caused bias: agency cost. As the name implies, economists have typically known that, just as grain is always lost to rats, employers always lose to employees who improperly think of themselves first. (Location 4133)
Most capitalist owners in a vast web of free-market economic activity are selected for ability by surviving in a brutal competition with other owners and have a strong incentive to prevent all waste in operations within their ownership. (Location 4145)
Replace such owners by salaried employees of the state and you will normally get a substantial reduction in overall efficiency, as each employee who replaces an owner is subject to incentive-caused bias as he determines what service he will give in exchange for his salary and how much he will yield to peer pressure from many fellow employees who do not desire his creation of any strong performance model. (Location 4147)
man tends to game all human systems, often displaying great ingenuity in wrongly serving himself at the expense of others. Anti-gaming features, therefore, constitute a huge and necessary part of almost all system design. (Location 4151)
Of course, money is now the main reward that drives habits. 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. (Location 4157)
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. (Location 4161)
Granny’s rule, to be specific, is the requirement that children eat their carrots before they get dessert. The business version requires that executives force themselves daily to first do their unpleasant and necessary tasks before rewarding themselves by proceeding to their pleasant tasks. Given reward superpower, this practice is wise and sound. Moreover, the rule can also be used in the non-business part of life. The emphasis on daily use of this practice is not accidental. The consultants well know, after the teaching of Skinner, that prompt rewards work best. Punishments, of course, also strongly influence behavior and cognition, although not so flexibly and wonderfully as rewards. For instance, illegal price fixing was fairly common in America when it was customarily punished by modest fines. Then, after a few prominent business executives were removed from their eminent positions and sent to federal prisons, price-fixing behavior was greatly reduced. (Location 4168)
Liking or loving, intertwined with admiration in a feedback mode, often has vast practical consequences in areas far removed from sexual attachments. For instance, a man who is so constructed that he loves admirable persons and ideas with a special intensity has a huge advantage in life. (Location 4195)
But the dislikings and hatreds never go away completely. Born into man, these driving tendencies remain strong. Thus, we get maxims like the one from England: “Politics is the art of marshaling hatreds.” And we also get the extreme popularity of very negative political advertising in the United States. (Location 4209)
Disliking / hating tendency also 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 his dislike; and 3) distort other facts to facilitate hatred. (Location 4216)
It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. So man’s doubt-avoidance tendency is quite consistent with the history of his ancient, nonhuman ancestors. (Location 4220)
As we shall see later when we get to social-proof tendency and stress-influence tendency, what usually triggers doubt-avoidance tendency is some combination of 1) puzzlement and 2) stress. (Location 4230)
is not too much in many cases to appraise early-formed habits as destiny. When Marley’s miserable ghost [in A Christmas Carol] says, “I wear the chains I forged in life,” he is talking about the chains of habit that were too light to be felt before they became too strong to be broken. The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured. (Location 4237)
“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. (Location 4241)
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. (Location 4250)
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. (Location 4260)
Planck is famous not only for his science but also for saying that even in physics the radically new ideas are seldom really accepted by the old guard. Instead, said Planck, progress is made by a new generation that comes along, less brain-blocked by its previous conclusions. (Location 4266)
One corollary of inconsistency-avoidance tendency is that a person making big sacrifices in the course of assuming a new identity will intensify his devotion to the new identity. After all, it would be quite inconsistent behavior to make a large sacrifice for something that was no good. Thus civilization has invented many tough and solemn initiation ceremonies, often public in nature, that intensify new commitments made. (Location 4276)
who gain advantage from triggering his subconscious inconsistency-avoidance tendency. Few people demonstrated this process better than Ben Franklin. As he was rising from obscurity in Philadelphia and wanted the approval of some important man, Franklin would often maneuver that man into doing Franklin some unimportant favor, like lending Franklin a book. Thereafter, the man would admire and trust Franklin more because a non-admired and non-trusted Franklin would be inconsistent with the appraisal implicit in lending Franklin the book. (Location 4282)
The practice of Franklin, whereunder he got approval from someone by maneuvering him into treating Franklin favorably, works viciously well in reverse. When one is maneuvered into deliberately hurting some other person,… (Location 4288)
The effect accounts for much prisoner abuse by guards, increasing their dislike and hatred for prisoners that exists as a consequence of the guards’ reciprocation of hostility… (Location 4290)
So strong is inconsistency-avoidance tendency that it will often prevail after one has merely pretended to have some identity, habit, or conclusion. Thus, for a while, many an actor sort of believes he is Hamlet, prince of Denmark. And many a hypocrite is improved by his pretensions of virtue. And many a judge and juror, while pretending objectivity, is gaining objectivity. And… (Location 4295)
For instance, a near-ultimate inconsistency would be to teach something to others that one did not believe true. So in clinical medical education, the learner is forced to “see one, do one, then teach one,”… (Location 4300)
For instance, modern education often does much damage when young students are taught dubious political notions and then enthusiastically push these notions on the rest of us. The pushing seldom convinces others. But as students pound into their mental habits what they are pushing out, the students are often permanently damaged. Educational institutions that create a climate where much of this goes on are, I think, irresponsible. It is important… (Location 4303)
advanced human civilization, culture greatly increases the effectiveness of curiosity in advancing knowledge. For instance, Athens (including its colony, Alexandria) developed much math and science out of pure curiosity, while the Romans made almost no contribution to either math or science. They instead concentrated their attention on the “practical” engineering of mines, roads, aqueducts, etc. Curiosity, enhanced by the best of modern education—which is, by definition, a minority part in many places—much helps man to prevent or reduce bad… (Location 4309)
Kant was famous for his categorical imperative, a sort of golden rule that required humans to follow those behavior patterns that, if followed by all others, would make the… (Location 4316)
A member of a species designed through evolutionary process to want often scarce food is going to be driven strongly toward getting food when it first sees food. This is going to occur often, and will tend to create some conflict when the food is seen in the possession of another member of the same species. This is probably the evolutionary origin of the envy/jealousy tendency that lies so deep in human nature. (Location 4327)
Envy/jealousy is extreme in myth, religion, and literature, wherein, in account after account, it triggers hatred and injury. It was regarded as so pernicious by the Jews of the civilization that preceded Christ that it was forbidden, by phrase after phrase, in the laws of Moses. You were even warned by the prophet not to covet your neighbor’s donkey. (Location 4331)
As I have shared the observation of life with Warren Buffett over decades, I have heard him wisely say on several occasions, “It is not greed that drives the world but envy.” (Location 4338)
When did any of you last engage in any large group discussion of some issue wherein adult envy/jealousy was identified as the cause of someone’s argument? There seems to be a general taboo against any such claim. If so, what accounts for the taboo? My guess is that people widely and generally sense that labeling some position as driven by envy/jealousy will be regarded as extremely insulting to the position taker, possibly more so when the diagnosis is correct than when it is wrong. And if calling a position envy-driven is perceived as the equivalent of describing its holder as a childish mental basket case, then it is quite understandable how a general taboo has arisen. (Location 4341)
The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as extreme, as it is in apes, monkeys, dogs, and many less cognitively gifted animals. The tendency clearly facilitates group cooperation for the benefit of members. In this respect, it mimics much genetic programming of the social insects. (Location 4349)
What both human and ant history suggest is that 1) nature has no general algorithm making intraspecies, turn-the-other-cheek behavior a booster of species survival; 2) it is not clear that a country would have good prospects were it to abandon all reciprocate-disfavor tendency directed at outsiders; and 3) if turn-the-other-cheek behavior is a good idea for a country as it deals with outsiders, man’s culture is going to have to do a lot of heavy lifting because his genes won’t be of much help. (Location 4358)
The standard antidote to one’s overactive hostility is to train oneself to defer reaction. As my smart friend Tom Murphy so frequently says, “You can always tell the man off tomorrow, if it is such a good idea.” (Location 4363)
the tendency to reciprocate favor for favor is also very intense, so much so that it occasionally reverses the course of reciprocated hostility. Weird pauses in fighting have sometimes occurred right in the middle of wars, triggered by some minor courtesy or favor on the part of one side, followed by favor reciprocation from the other side, and so on, until fighting stopped for a considerable period. This happened more than once in the trench warfare of World War I, over big stretches of the front and much to the dismay of the generals. (Location 4364)
Daily interchange in marriage is also assisted by reciprocation tendency, without which marriage would lose much of its allure. (Location 4370)
This helps make the tendency a strong force that can sometimes be used by some men to mislead others, which happens all the time. For instance, when an automobile salesman graciously steers you into a comfortable place to sit and gives you a cup of coffee, you are very likely being tricked, by this small courtesy alone, into parting with an extra $500. (Location 4375)
Wise employers, therefore, try to oppose the reciprocate-favor tendencies of employees engaged in purchasing. The simplest antidote works best: Don’t let them accept any favors from vendors. (Location 4382)
Reciprocation tendency subtly causes many extreme and dangerous consequences, not just on rare occasions but pretty much all the time. (Location 4405)
To the extent the feeling of guilt has an evolutionary base, I believe the most plausible cause is the mental conflict triggered in one direction by reciprocation tendency and in the opposite direction by reward-superresponse tendency pushing one to 100 percent of some good thing. (Location 4417)
In the standard conditioned reflexes studied by Skinner and most common in the world, responsive behavior, creating a new habit, is directly triggered by rewards previously bestowed. For instance, a man buys a can of branded shoe polish, has a good experience with it when shining his shoes, and because of this “reward” buys the same shoe polish when he needs another can. (Location 4424)
For instance, consider the case of many men who have been trained by their previous experience in life to believe that when several similar items are presented for purchase, the one with the highest price will have the highest quality. (Location 4427)
With luxury goods, the process works with a special boost because buyers who pay high prices often gain extra status from thus demonstrating both their good taste and their ability to pay. (Location 4433)
Similarly, it is not from mere chance that military bands play such impressive music. That kind of music, appearing in mere association with military service, helps to attract soldiers and keep them in the army. (Location 4438)
This unlikely correlation causes him to try the casino again, or again and again, to his horrid detriment. (Location 4445)
The proper antidotes to being made such a patsy by past success are 1) to carefully examine each past success, looking for accidental, non-causative factors associated with such success that will tend to mislead as one appraises the odds implicit in a proposed new undertaking; and 2) to look for dangerous aspects of the new undertaking that were not present when past success occurred. (Location 4447)
In Poor Richard’s Almanack, Franklin counseled, “Keep your eyes wide open before marriage and half shut thereafter.” Perhaps this eyes-half-shut solution is about right, but I favor a tougher prescription: “See it like it is and love anyway.” (Location 4458)
Another common bad effect from the mere association of a person and a hated outcome is displayed in Persian messenger syndrome. Ancient Persians actually killed some messengers whose sole fault was that they brought home truthful bad news, say, of a battle lost. It was actually safer for the messenger to run away and hide instead of doing his job as a wiser boss would have wanted it done. (Location 4462)
It is actually dangerous in many careers to be a carrier of unwelcome news. Union negotiators and employer representatives often know this, and it leads to many tragedies in labor relations. Sometimes lawyers, knowing their clients will hate them if they recommend an unwelcome but wise settlement, will carry on to disaster. (Location 4466)
The proper antidote to creating Persian messenger syndrome and its bad effects, like those at CBS, is to develop, through exercise of will, a habit of welcoming bad news. At Berkshire, there is a common injunction: “Always tell us the bad news promptly. It is only the good news that can wait.” It also helps to be so wise and informed that people fear not telling you bad news because you are so likely to get it elsewhere. (Location 4474)
Instead, just as he must learn that trend does not always correctly predict destiny, he must learn that the average dimension in some group will not reliably guide him to the dimension of some specific item. (Location 4491)
His mother, who was a very sane woman, then refused to believe he was dead. That’s simple, pain-avoiding psychological denial. The reality is too painful to bear, so one distorts the facts until they become bearable. We all do that to some extent, often causing terrible problems. The tendency’s most extreme outcomes are usually mixed up with love, death, and chemical dependency. (Location 4496)
In chemical dependency, wherein morals usually break down horribly, addicted persons tend to believe that they remain in respectable condition, with respectable prospects. They thus display an extremely unrealistic denial of reality as they go deeper and deeper into deterioration. (Location 4501)
nowadays Alcoholics Anonymous routinely achieves a 50 percent cure rate by causing several psychological tendencies to act together to counter addiction. However, the cure process is typically difficult and draining, and a 50 percent success rate implies a 50 percent failure rate. One should stay far away from any conduct at all likely to drift into chemical dependency. Even a small chance of suffering so great a damage should be avoided. (Location 4504)
Even man’s minor possessions tend to be over-appraised. Once owned, they suddenly become worth more to him than he would pay if they were offered for sale to him and he didn’t already own them. There is a name in psychology for this over-appraise-your-own-possessions phenomenon: the endowment effect. All man’s decisions are suddenly regarded by him as better than would have been the case just before he made them. Man’s excess of self-regard typically makes him strongly prefer people like himself. (Location 4511)
Their experiments all show that the finder of a lost wallet containing identity clues will be most likely to return the wallet when the owner most closely resembles the finder. Given this quality in psychological nature, cliquish groups of similar persons will always be a very influential part of human culture, even after we wisely try to dampen the worst effects. (Location 4515)
Let us consider some foolish gambling decisions. In lotteries, the play is much lower when numbers are distributed randomly than when the player picks his own number. This is quite irrational. The odds are almost exactly the same and much against the player. (Location 4525)
Intensify man’s love of his own conclusions by adding the possessory wallop from the endowment effect and you will find that a man who has already bought a pork-belly future on a commodity exchange now foolishly believes even more strongly than before in the merits of his speculative bet. And foolish sports betting by people who love sports and think they know a lot about the relative merits of teams is a lot more addictive than racetrack betting, partly because of man’s automatic over-appraisal of his own complicated conclusions. (Location 4528)
Excessive self-regard tendency diminishes the foolish bettor’s accuracy in appraising his… (Location 4533)
Excesses of self-regard often cause bad hiring decisions because employers grossly over-appraise the worth of their own conclusions that rely on impressions in face-to-face contact. The correct antidote to this sort of folly is to underweigh… (Location 4536)
Because man is likely to be overinfluenced by face-to-face impressions that, by definition, involve his active participation, a job candidate who is a marvelous presenter often causes… (Location 4542)
According to Tolstoy, the worst criminals don’t appraise themselves as all that bad. They come to believe either that 1) they didn’t commit their crimes or 2) considering the pressures and disadvantages of their lives, it is understandable and… (Location 4547)
On the personal level, a man should try to face the two simple facts: 1) Fixable but unfixed bad performance is bad character and tends to create more of itself, causing more damage to the excuse-giver with each tolerated instance; and 2) in demanding places, like athletic teams and General Electric, you are almost sure to be discarded in due course if you keep giving excuses instead of behaving as you should. The main institutional antidotes to this part of the Tolstoy effect are 1) a fair,… (Location 4552)
The child later became dean of the USC School of Music, and then related to me what his father said when he saw his child taking candy from the stock of his employer with the excuse that he intended to replace it later. The father said, “Son, it would be better for you to… (Location 4558)
While an excess of self-regard is often counterproductive in its effects on cognition, it can cause some weird successes from overconfidence that happens to cause success. This factor accounts for the adage “Never underestimate the man who overestimates himself.” Of course, some high self-appraisals are correct and serve better than false modesty. Moreover, self-regard in the… (Location 4563)
Of all forms of useful pride, perhaps the most desirable is a justified pride in being trustworthy. Moreover, the trustworthy man, even after allowing for the inconveniences of his chosen course, ordinarily has a life that averages… (Location 4569)
One standard antidote to foolish optimism is trained, habitual use of the simple probability math of Fermat and Pascal, taught in my youth to high school sophomores. The mental rules of thumb that evolution gives you to deal with risk are not adequate. They resemble the dysfunctional golf grip you would have if you relied on a grip driven by evolution instead of golf lessons. (Location 4578)
That is, the loss seems to hurt much more than the gain seems to help. Moreover, if a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away. I include the natural human reactions to both kinds of loss experience—the loss of the possessed reward and the loss of the almost-possessed reward—under one description, deprival-superreaction tendency. (Location 4582)
Deprival-superreaction tendency often protects ideological or religious views by triggering dislike and hatred directed toward vocal nonbelievers. This happens in part because the ideas of the nonbelievers, if they spread, will diminish the influence of views that are now supported by a comfortable environment, including a strong belief-maintenance system. (Location 4596)
Deprival-superreaction tendency has ghastly effects in labor relations. Most of the deaths in the labor strife that occurred before World War I came when employers tried to reduce wages. (Location 4615)
Deprival-superreaction tendency is also a huge contributor to ruin from the compulsion to gamble. First, it causes the gambler to have a passion to get even once he has suffered a loss, and the passion grows with the loss. Second, the most addictive forms of gambling provide a lot of near misses, and each one triggers deprival-superreaction tendency. (Location 4621)
For some such reason, man’s evolution left him with social-proof tendency, an automatic tendency to think and act as he sees others around him thinking and acting. (Location 4649)
Because both bad and good behavior are made contagious by social-proof tendency, it is highly important that human societies 1) stop any bad behavior before it spreads and 2) foster and display all good behavior. (Location 4670)
In social proof, it is not only action by others that misleads but also their inaction. In the presence of doubt, inaction by others becomes social proof that inaction is the right course. (Location 4679)
If only one lesson is to be chosen from a package of lessons involving social-proof tendency and used in self-improvement, my favorite would be: Learn how to ignore the examples from others when they are wrong, because few skills are more worth having. (Location 4700)
A particularly reprehensible form of sales practice occurs in the offices of some real estate brokers. A buyer from out of the city, perhaps needing to shift his family there, visits the office with little time available. The salesman deliberately shows the customer three awful houses at ridiculously high prices. Then he shows him a merely bad house at a price only moderately too high. And boom, the broker often makes an easy sale. (Location 4710)
When a man’s steps are consecutively taken toward disaster, with each step being very small, the brain’s contrast-misreaction tendency will often let the man go too far toward disaster to be able to avoid it. This happens because each step presents so small a contrast from his present position. (Location 4717)
In a phenomenon less well recognized but still widely known, light stress can slightly improve performance—say, in examinations—whereas heavy stress causes dysfunction. (Location 4728)
He found that 1) he could classify dogs so as to predict how easily a particular dog would break down, 2) the dogs hardest to break down were also the hardest to return to their pre-breakdown state, 3) any dog could be broken down, and 4) he couldn’t reverse a breakdown except by reimposing stress. (Location 4746)
The great algorithm to remember in dealing with this tendency is simple: An idea or a fact is not worth more merely because it is easily available to you. (Location 4775)
Throughout his life, a wise man engages in practice of all his useful, rarely used skills, many of them outside his discipline, as a sort of duty to his better self. 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. His learning capacity will also shrink as he creates gaps in the latticework of theory he needs as a framework for understanding new experience. It is also essential for a thinking man to assemble his skills into a checklist that he routinely uses. Any other mode of operation will cause him to miss much that is important. (Location 4780)
a skill is raised to fluency, instead of merely being crammed in briefly to enable one to pass some test, then the skill 1) will be lost more slowly and 2) will come back faster when refreshed with new learning. These are not minor advantages, and a wise man engaged in learning some important skill will not stop until he is really fluent in it. (Location 4787)
Practically no one is good at learning complex new skills when very old. But some people remain pretty good at maintaining intensely practiced old skills until late in life, as one can notice in many a bridge tournament. (Location 4795)
Continuous thinking and learning, done with joy, can somewhat help delay what is inevitable. (Location 4798)
The obvious implication: Be careful whom you appoint to power, because a dominant authority figure will often be hard to remove, aided as he will be by authority-misinfluence tendency. (Location 4839)
No one knew this better than Carl Braun, who designed oil refineries with spectacular skill and integrity. He had a very simple rule, one of many in his large, Teutonic company: You had to tell who was to do what, where, when, and why. And if you wrote a communication leaving out your explanation of why the addressee was to do what was ordered, Braun was likely to fire you, because Braun well knew that ideas got through best when the reasons for the ideas were meticulously laid out. (Location 4860)
Unfortunately, reason-respecting tendency is so strong that even a person’s giving of meaningless or incorrect reasons will increase compliance with his orders and requests. This has been demonstrated in psychology experiments wherein compliance practitioners successfully jump to the head of the lines in front of copying machines by explaining their reason: “I have to make some copies.” (Location 4866)
At most corporations, if you make an acquisition and it turns out to be a disaster, all the people, paperwork, and presentations that caused the foolish acquisition are quickly forgotten. Nobody wants to be associated with the poor outcome by mentioning it. But at Johnson & Johnson, the rules make everybody revisit old acquisitions, comparing predictions with outcomes. That is a very smart thing to do. (Location 4935)
Rich Harris’s strong-selling book The Nurture Assumption. You will recall that this work demonstrated that peer pressure on the young is far more important, and parental nurture much less important, than had been commonly recognized. (Location 4972)