Charlie Munger, billionaire investor and business partner of Warren Buffett, often discusses the importance of developing a framework of mental models in order to better understand the world and our own behavior. With reference to my introductory post, I thought a good place to start off this blog is to discuss some of the more common cognitive biases which influence our thoughts and decisions, often without us being aware it is happening.
1. Denial
Humans have a need to feel that they are capable of living in the world. The mind has a tremendous capability to deny, distort or ignore unpleasant facts about ourselves and reality, particularly when those facts will cause us pain or will bring into doubt our most closely held beliefs and models about who we are and how the world works.
2. Pain Avoidance
Our mind has a strong desire to avoid pain or discomfort. We lie in bed in the morning since leaving the bed will cause discomfort. We avoid social interactions which might lead to a painful rejection. For those who suffer from procrastination, often the necessary work on a task won’t start until the deadline is so close that the pain of failure looms so large that it outweighs the discomfort of starting. Our mind will naturally try to avoid pain, without considering the longer term consequences of that behavior. Tony Robbins discusses a unique and powerful human ability to ‘re-wire’ the pain and pleasure associations in our brain- for example someone could associate so much pain to the idea of being unhealthy or unattractive, that to them working out regularly is the far less painful behavior. This is one way to leverage the powerful pain avoidance bias into our own favor.
3. Reward/Punishment – The Power of Incentives
The mind responds strongly to incentives, such as the potential rewards or punishment. Always consider the incentives when analyzing your own and other’s behavior.
4. Inconsistency Avoidance
The mind has a reluctance to change. Telemarketers looking for donations to a veterinarian cause have more success if they first ask the question ‘Do you like animals?’. A person who just answered yes to this question will be more inclined to donate, since they feel a need to be consistent. Another example is when someone asks you for a small favor: having done the favor, you may actually find yourself liking that person more. One factor for this is that you think subconsciously, “I did this person a favor, therefore, I must like them”.
5. Excessive Self Regard
Most people are familiar with this story: a country conducted a survey and found that 90% of people consider themselves above average drivers. Humans have a tendency to over-estimate their own abilities and skills.
6. Availability/Familiarity Bias
That which is readily available, or that which we are already familiar with, tends to be over-weighted in our decision making.
7. Doubt Avoidance
The mind finds doubt to be uncomfortable and will seek to eliminate doubt as quickly as it can, which can manifest in making quick or sub-optimal decisions simply to get the doubt over with. This can also be a reason for not questioning our own beliefs closely, so as not to introduce doubt into our thinking.
8. Disliking/Hating and Liking/Loving
Everyone develops preferences and things that they dislike/hate and like/love, including people in particular. If you really hate someone, you’ll be disinclined to listen to anything that they have to say, even if those things may actually benefit you. Alternatively, you may be more inclined to listen to or to ignore the negatives of someone who you like. I’ve also heard this model referred to as the ‘Horns and Halo Effect’. This bias shows the value of developing a likeable personality.
10. Social Proof
Our minds have access only to limited information when making decisions, and so we indirectly will rely on the opinions of other people when making our own judgments. This is why Social Proof is a powerful model, our mind assumes that if other people like someone, then there’s a very good chance that they are likeable. Social Proof also is associated with the ‘herd mentality’, as in, if other people are doing it then we assume it’s the right thing for us to be doing too.
11. Envy/Jealousy
This is fairly self explanatory. Don’t underestimate the power of envy to cloud the mind and judgment.
12. Mere Association
The mind is easily influenced by mere association. This is why celebrity endorsements are powerful- if we come to associate a given product to someone who we like or admire, that product will be viewed more favorably in our mind merely by being associated.
13. Authority Influence
The mind is strongly wired to respond to authority, to follow orders just because someone says so. The famous Milgram experiment is an example of how people will be obedient to a perceived authority, even to the point of killing someone.
14. Reciprocity
This is the tendency to want to reciprocate and return the favor when someone helps us.
15. Deprival Super-Reaction
This is the mind’s tendency to strongly prefer avoiding a loss rather than acquiring a gain.
16. Stress Influence
The mind’s decision making ability begins to deteriorate when put under stress. Some stress can improve performance, but heavy stress will often lead to dysfunction.
17. Reason Respecting
Oftentimes the mind just wants to know the answer, without looking deeper at the reason behind the answer. This will lead to a shallow understanding of a topic.
18. Contrast Misreaction
Contrasts can distort our decision making. An example is a real estate agent showing you a handful of run down, terrible properties before leading you to the property they want you to buy, which will now appear much better to you in comparison. Another example of this is the Stoic technique of imagining some of the ways which your life could be significantly worse in this moment, which will cause your mind to more favorably view your current circumstances.
19. Over-Optimism
Humans can have a tendency to be over-optimistic, often to the point where they have unrealistic beliefs about themselves or what they can realistically achieve in a given period of time. I’ve personally found that Gantt charts are a helpful way of managing projects and expectations of what we or a team can accomplish on a project, since they force the mind to logically lay out our plans over time into their underlying components, a technique which forces our mind to be realistic about timelines and what can be done.
20. Curiosity (or lack of)
Humans receive a tremendous value by continuing to be curious about the world and learn. For many people, curiosity stops after school as we stop making an active effort to learn more about the world and refresh our existing knowledge.
21. Kantian Fairness
Humans have an inherent tendency to believe that things should be fair. However, sometimes the system as a whole may be better off with some inherent unfairness built into it. One example of this is Charlie Munger’s belief that Navy crews whose ship gets grounded should have their career ended, no matter what. It means that occasionally a crew will lose their careers through no fault of their own (an unfair outcome). However the overall benefit of this rule is that all Navy crews will exercise tremendous care to ensure that their ships don’t run aground. A related concept is the idea of seeing the world as it really is, rather than as you believe it should be. Machiavelli’s famous book The Prince could be interpreted as a guidebook for dishonest or unethical behavior in order to gain power and influence over others. However viewed from another angle, it is simply a guidebook for how best to achieve one’s aims in the world as it really is (as in, imperfect) rather than pretending or believing that the world is always a wonderful place full of angels, and as a result being a less effective person.
22. Twaddle Tendency
Don’t underestimate the mind’s tendency to spend large amounts of time and energy on things which are simply unimportant, or ‘Twaddle’.
23. Lollapalooza
When multiple of these models begin to work in tandem with each other, they can generate incredibly powerful or extreme effects.