Watch & Listen
The Psychology of Human Misjudgment
, subject: Psychological causes of human misjudgment, 1992
Name the tendency behind a decision before trusting its result.
42
Coverage Score
7
Scored evidence
About this work
The expanded 2005 text in Poor Charlie's Almanack is Talk Eleven, combining lectures delivered in 1992, 1994 and 1995 with new material. Its Harvard Faculty Club lecture was in 1994; the 1995 lecture was at the Boston Harbor Hotel.
Why explore it
Best if you want psychological tendencies you can test against business decisions, including the reciprocity example David draws from Les Schwab.
Key themes
- A recommendation with a clear scope
- Reciprocity in a tire business
- Check what behavior you reward
Evidence and original sources
Sources: official Founders episodes — #79, #329, #330, #339, #348, #365
This record is supported by 7 public evidence rows linked to original Founders episodes.
- Charlie Munger (The Complete Investor) — David recommends reading Munger’s lecture The Psychology of Human Misjudgment, then distinguishes it from the same-titled chapter in The Complete Investor.
- Charlie Munger (the NEW Poor Charlie's Almanack) — Reading the new Poor Charlie's Almanack, David says that if you only read one thing in the book it should be the final talk, The Psychology of Human Misjudgment.
- Les Schwab (Charlie Munger recommended this book) — David draws on the reciprocity tendency in Charlie Munger’s Psychology of Human Misjudgment speech to explain how Les Schwab’s free tire repairs encouraged customers to return.
- Joseph Duveen: Robber Baron Art Dealer — David names Munger's The Psychology of Human Misjudgment three times as the lens for Duveen's selling, arguing its tendencies worked on the era's most sophisticated collectors and not only on 'dullards'.
- The Financial Genius Behind A Century of Wall Street Scandals: Ivar Kreuger — David reads Munger's FedEx and Xerox incentive examples from the Psychology of Human Misjudgment section and applies the lesson to the incentives facing Kreuger's bankers and auditors.
- Nick Sleep's Letters: The Full Collection of the Nomad Investment Partnership Letters to Partners — David quotes Nick Sleep identifying Munger's The Psychology of Human Misjudgment as the best talk on investing, then recalls that reference during the 2008-panic discussion.