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Charlie Munger on the Psychology of Human Misjudgment (Part 2)
Posted by: Tannor Pilatzke (IP Logged)
Date: November 23, 2013 10:22AM
Speech at Harvard University, estimated date: June 1995
Transcription, comments [in brackets] and minor editing by Whitney Tilson
15. Bias from liking distortion, including the tendency to especially like oneself, one’s own kind and one’s own idea structures, and the tendency to be especially susceptible to being misled by someone liked. Disliking distortion, bias from that, the reciprocal of liking distortion and the tendency not to learn appropriately from someone disliked.
Well here, again, we’ve got hugely powerful tendencies, and if you look at the wars in part of the Harvard Law School, as we sit here, you can see that very brilliant people get into this almost pathological behavior. And these are very, very powerful, basic, subconscious psychological tendencies, or at least party subconscious.
Now let’s get back to B.F. Skinner, man-with-a-hammer syndrome revisited. Why is man- with-a-hammer syndrome always present? Well if you stop to think about it, it’s incentive- caused bias. His professional reputation is all tied up with what he knows. He likes himself and he likes his own ideas, and he’s expressed them to other people -- consistency and commitment tendency. I mean you’ve got four or five of these elementary psychological tendencies combining to create this man-with-a-hammer syndrome.
Once you realize that you can’t really buy your thinking -- partly you can, but largely you can’t in this world -- you have learned a lesson that’s very useful in life. George Bernard Shaw had a character say in The Doctor’s Dilemma, “In the last analysis, every profession is a conspiracy against the laity.” But he didn’t have it quite right, because it isn’t so much a conspiracy as it is a subconscious, psychological tendency.
The guy tells you what is good for him. He doesn’t recognize that he’s doing anything wrong any more than that doctor did when he was pulling out all those normal gall bladders. And he believes his own idea structures will cure cancer, and he believes that the demons that he’s the guardian against are the biggest demons and the most important ones, and in fact they may be very small demons compared to the demons that you face. So you’re getting your advice in this world from your paid advisor with this huge load of ghastly bias. And woe to you.
There are only two ways to handle it: you can hire your advisor and then just apply a windage factor, like I used to do when I was a rifle shooter. I’d just adjust for so many miles an hour wind. Or you can learn the basic elements of your advisor's trade. You don’t have to learn very much, by the way, because if you learn just a little then you can make him explain why he’s right. And those two tendencies will take part of the warp out of the thinking you’ve tried to hire done. By and large it works terribly. I have never seen a management consultant’s report in my long life that didn’t end with the following paragraph: "What this situation really needs is more management consulting." Never once. I always turn to the
last page. Of course Berkshire doesn’t hire them, so I only do this on sort of a voyeuristic basis. Sometimes I’m at a non-profit where some idiot hires one. [Laughter]
16. Seventeen [he means 16]: bias from the non-mathematical nature of the human brain in its natural state as it deal with probabilities employing crude heuristics, and is often misled by mere contrast, a tendency to overweigh conveniently available information and other psychologically misrouted thinking tendencies on this list.
When the brain should be using the simple probability mathematics of Fermat and Pascal applied to all reasonably obtainable and correctly weighted items of information that are of value in predicting outcomes, the right way to think is the way Zeckhauser plays bridge. It’s just that simple. And your brain doesn’t naturally know how to think the way Zeckhauser knows how to play bridge. Now, you notice I put in that availability thing, and there I’m mimicking some very eminent psychologists [Daniel] Kahneman, Eikhout[?] (I hope I pronounced that right) and [Amos] Tversky, who raised the idea of availability to a whole heuristic of misjudgment. And they are very substantially right.
I mean ask the Coca-Cola Company, which has raised availability to a secular religion. If availability changes behavior, you will drink a helluva lot more Coke if it’s always available. I mean availability does change behavior and cognition. Nonetheless, even though I recognize that and applaud Tversky and Kahneman, I don’t like it for my personal system except as part of a greater sub-system, which is you’ve got to think the way Zeckhauser plays bridge. And it isn’t just the lack of availability that distorts your judgment. All the things on this list distort judgment. And I want to train myself to kind of mentally run down the list instead of just jumping on availability. So that’s why I state it the way I do.
In a sense these psychological tendencies make things unavailable, because if you quickly jump to one thing, and then because you jumped to it the consistency and commitment tendency makes you lock in, boom, that’s error number one. Or if something is very vivid, which I’m going to come to next, that will really pound in. And the reason that the thing that really matters is now unavailable and what’s extra-vivid wins is, I mean, the extra- vividness creates the unavailability. So I think it’s much better to have a whole list of things that would cause you to be less like Zeckhauser than it is just to jump on one factor.
Here I think we should discuss John Gutfreund. This is a very interesting human example, which will be taught in every decent professional school for at least a full generation. Gutfreund has a trusted employee and it comes to light not through confession but by accident that the trusted employee has lied like hell to the government and manipulated the accounting system, and it was really equivalent to forgery. And the man immediately says, “I’ve never done it before, I’ll never do it again. It was an isolated example.” And of course it was obvious that he was trying to help the government as well as himself, because he thought the government had been dumb enough to pass a rule that he’d spoken against, and after all if the government’s not going to pay attention to a bond trader at Salomon, what kind of a government can it be?
At any rate, this guy has been part of a little clique that has made, well, way over a billion dollars for Salomon in the very recent past, and it’s a little handful of people. And so there are a lot of psychological forces at work, and then you know the guy’s wife, and he’s right in front of you, and there’s human sympathy, and he’s sort of asking for your help, which encourages reciprocation, and there’s all these psychological tendencies are working, plus the fact he’s part of a group that had made a lot of money for you. At any rate, Gutfreund does not cashier the man, and of course he had done it before and he did do it again. Well now you look as though you almost wanted him to do it again. Or God knows what you look like, but it isn’t good. And that simple decision destroyed Jim Gutfreund, and it’s so easy to do.
Now let’s think it through like the bridge player, like Zeckhauser. You find an isolated example of a little old lady in the See’s Candy Company, one of our subsidiaries, getting into the till. And what does she say? “I never did it before, I’ll never do it again. This is going to ruin my life. Please help me.” And you know her children and her friends, and she’d been around 30 years and standing behind the candy counter with swollen ankles. When you’re an old lady it isn’t that glorious a life. And you’re rich and powerful and there she is: “I never did it before, I’ll never do it again.” Well how likely is it that she never did it before? If you’re going to catch 10 embezzlements a year, what are the chances that any one of them -- applying what Tversky and Kahneman called baseline information -- will be somebody who only did it this once? And the people who have done it before and are going to do it again, what are they all going to say? Well in the history of the See’s Candy Company they always say, “I never did it before, and I’m never going to do it again.” And we cashier them. It would be evil not to, because terrible behavior spreads.
Remember...what was it? Serpico? I mean you let that stuff...you’ve got social proof, you’ve got incentive-caused bias, you’ve got a whole lot of psychological factors that will cause the evil behavior to spread, and pretty soon the whole damn...your place is rotten, the civilization is rotten. It’s not the right way to behave. And I will admit that I have...when I knew the wife and children, I have paid severance pay when I fire somebody for taking a mistress on an extended foreign trip. It’s not the adultery I mind, it’s the embezzlement. But there, I wouldn’t do it like Gutfreund did it, where they’d been cheating somebody else on my behalf. There I think you have to cashier. But if they’re just stealing from you and you get rid of them, I don’t think you need the last ounce of vengeance. In fact I don’t think you need any vengeance. I don’t think vengeance is much good.
17. Now we come to bias from over-influence by extra-vivid evidence.
Here’s one that...I’m at least $30 million poorer as I sit here giving this little talk because I once bought 300 shares of a stock and the guy called me back and said, “I’ve got 1,500 more,” and I said, “Will you hold it for 15 minutes while I think about it?” And the CEO of this company -- I have seen a lot of vivid peculiarities in a long life, but this guy set a world record; I’m talking about the CEO -- and I just mis-weighed it. The truth of the matter was the situation was foolproof. He was soon going to be dead, and I turned down the extra 1,500 shares, and it’s now cost me $30 million. And that’s life in the big city. And it wasn’t something where stock was generally available. So it’s very easy to mis- weigh the vivid evidence, and Gutfreund did that when he looked into the man’s eyes and forgave a colleague.
18. Twenty-two [he means 18]: Mental confusion caused by information not arrayed in the mind and theory structures, creating sound generalizations
developed in response to the question “Why?” Also, mis-influence from information that apparently but not really answers the question “Why?” Also, failure to obtain deserved influence caused by not properly explaining why.
Well we all know people who’ve flunked, and they try and memorize and they try and spout back and they just...it doesn’t work. The brain doesn’t work that way. You’ve got to array facts on the theory structures answering the question “Why?” If you don’t do that, you just cannot handle the world.
And now we get to Feuerstein, who was the general counsel with Salomon when Gutfreund made his big error, and Feuerstein knew better. He told Gutfreund, “You have to report this as a matter of morality and prudent business judgment.” He said, “It’s probably not illegal, there’s probably no legal duty to do it, but you have to do it as a matter of prudent conduct and proper dealing with your main customer.” He said that to Gutfreund on at least two or three occasions. And he stopped. And, of course, the persuasion failed, and when Gutfreund went down, Feuerstein went with him. It ruined a considerable part of Feuerstein’s life.
Well Feuerstein, [who] was a member of the Harvard Law Review, made an elementary psychological mistake. You want to persuade somebody, you really tell them why. And what did we learn in lesson one? Incentives really matter? Vivid evidence really works? He should’ve told Gutfreund, “You’re likely to ruin your life and disgrace your family and lose your money.” And is Mozer worth this? I know both men. That would’ve worked. So Feuerstein flunked elementary psychology, this very sophisticated, brilliant lawyer. But don’t you do that. It’s not very hard to do, you know, just to remember that “Why?” is very important.
19. Other normal limitations of sensation, memory, cognition and knowledge.
Well, I don’t have time for that. (Check out Daniel Kahneman and Amos Tversky)
20. Stress-induced mental changes, small and large, temporary and permanent.
Here, my favorite example is the great Pavlov. He had all these dogs in cages, which had all been conditioned into changed behaviors, and the great Leningrad flood came and it just went right up and the dog’s in a cage. And the dog had as much stress as you can imagine a dog ever having. And the water receded in time to save some of the dogs, and Pavlov noted that they’d had a total reversal of their conditioned personality. And being the great scientist he was, he spent the rest of his life giving nervous breakdowns to dogs, and he learned a helluva lot that I regard as very interesting.
I have never known any Freudian analyst who knew anything about the last work of Pavlov, and I’ve never met a lawyer who understood that what Pavlov found out with those dogs had anything to do with programming and de-programming and cults and so forth. I mean the amount of elementary psychological ignorance that is out there in high levels is very significant[?].
21. Then we’ve got other common mental illnesses and declines, temporary and permanent, including the tendency to lose ability through disuse.
22. And then I’ve got development and organizational confusion from say-something syndrome.
And here my favorite thing is the bee, a honeybee. And a honeybee goes out and finds the nectar and he comes back, he does a dance that communicates to the other bees where the nectar is, and they go out and get it. Well some scientist who is clever, like B.F. Skinner, decided to do an experiment. He put the nectar straight up. Way up. Well, in a natural setting, there is no nectar where they’re all straight up, and the poor honeybee doesn’t have a genetic program that is adequate to handle what he now has to communicate. And you’d think the honeybee would come back to the hive and slink into a corner, but he doesn’t.
He comes into the hive and does this incoherent dance, and all my life I’ve been dealing with the human equivalent of that honeybee. [Laughter] And it’s a very important part of human organization so the noise and the reciprocation and so forth of all these people who have what I call say-something syndrome don’t really affect the decisions.
Now the time has come to ask two or three questions. This is the most important question in this whole talk:
1. What happens when these standard psychological tendencies combine? What happens when the situation, or the artful manipulation of man, causes several of these tendencies to operate on a person toward the same end at the same time?
The clear answer is the combination greatly increases power to change behavior, compared to the power of merely one tendency acting alone. Examples are:
· Tupperware parties. Tupperware’s now made billions of dollars out of a few manipulative psychological tricks. It was so schlocky that directors of Justin Dart’s company resigned when he crammed it down his board’s throat. And he was totally right, by the way, judged by economic outcomes.
· Moonie [as in Sun Myung Moon and the Unification Church] conversion methods: boy do they work. He just combines four or five of these things together.
· The system of Alcoholics Anonymous: a 50% no-drinking rate outcome when everything else fails? It’s a very clever system that uses four or five psychological systems at once toward, I might say, a very good end.
· The Milgrim experiment. It’s been widely interpreted as mere obedience, but the truth of the matter is that the experimenter who got the students to give the heavy shocks in Milgrim, he explained why. It was a false explanation. “We need this to look for scientific truth,” and so on. That greatly changed the behavior of the people. And number two, he worked them up: tiny shock, a little larger, a little larger. So commitment and consistency tendency and the contrast principle were both working in favor of this behavior. So again, it’s four different psychological tendencies.
When you get these lollapalooza effects you will almost always find four or five of these things working together.
When I was young there was a whodunit hero who always said, “Cherche la femme.” [In French, "Look for the woman."] What you should search for in life is the combination, because the combination is likely to do you in. Or, if you’re the inventor of Tupperware parties, it’s likely to make you enormously rich if you can stand shaving when you do it.
One of my favorite cases is the McDonald-Douglas airliner evacuation disaster. The government requires that airliners pass a bunch of tests, one of them is evacuation: get everybody out, I think it’s 90 seconds or something like that. It’s some short period of time. The government has rules, make it very realistic, so on and so on. You can’t select nothing but 20-year-old athletes to evacuate your airline. So McDonald-Douglas schedules one of these things in a hangar, and they make the hangar dark and the concrete floor is 25 feet down, and they’ve got these little rubber chutes, and they’ve got all these old people, and they ring the bell and they all rush out, and in the morning, when the first test is done, they create, I don’t know, 20 terrible injuries when people go off to hospitals, and of course they scheduled another one for the afternoon.
By the way they didn’t read[?] the time schedule either, in addition to causing all the injuries. Well...so what do they do? They do it again in the afternoon. Now they create 20 more injuries and one case of a severed spinal column with permanent, unfixable paralysis. These are engineers, these are brilliant people, this is thought over through in a big bureaucracy. Again, it’s a combination of [psychological tendencies]: authorities told you to do it. He told you to make it realistic. You’ve decided to do it. You’d decided to do it twice. Incentive-caused bias. If you pass you save a lot of money. You’ve got to jump this hurdle before you can sell your new airliner. Again, three, four, five of these things work together and it turns human brains into mush. And maybe you think this doesn’t happen in picking investments? If so, you’re living in a different world than I am.
Finally, the open-outcry auction. Well the open-outcry auction is just made to turn the brain into mush: you’ve got social proof, the other guy is bidding, you get reciprocation tendency, you get deprival super-reaction syndrome, the thing is going away... I mean it just absolutely is designed to manipulate people into idiotic behavior.
Finally the institution of the board of directors of the major American company. Well, the top guy is sitting there, he’s an authority figure. He’s doing asinine things, you look around the board, nobody else is objecting, social proof, it’s okay? Reciprocation tendency, he’s raising the directors fees every year, he’s flying you around in the corporate airplane to look at interesting plants, or whatever in hell they do, and you go and you really get extreme dysfunction as a corrective decision-making body in the typical American board of directors. They only act, again the power of incentives, they only act when it gets so bad it starts making them look foolish, or threatening legal liability to them. That’s Munger’s rule. I mean there are occasional things that don’t follow Munger’s rule, but by and large the board of directors is a very ineffective corrector if the top guy is a little nuts, which, of course, frequently happens.
2. The second question: Isn’t this list of standard psychological tendencies improperly tautological compared with the system of Euclid? That is, aren’t there overlaps? And can’t some items on the list be derived from combinations of other items?
The answer to that is, plainly, yes.
3. Three: What good, in the practical world, is the thought system indicated by the list? Isn’t practical benefit prevented because these psychological tendencies are programmed into the human mind by broad evolution so we can’t get rid of them? [By] broad evolution, I mean the combination of genetic and cultural evolution, but mostly genetic.
Well the answer is the tendencies are partly good and, indeed, probably much more good than bad, otherwise they wouldn’t be there. By and large these rules of thumb, they work pretty well for man given his limited mental capacity. And that’s why they were programmed in by broad evolution. At any rate, they can’t be simply washed out automatically and they shouldn’t be. Nonetheless, the psychological thought system described is very useful in spreading wisdom and good conduct when one understands it and uses it constructively.
Here are some examples:
• One: Karl Braun’s communication practices. He designed oil refineries with spectacular skill and integrity. He had a very simple rule. Remember I said, “Why is it important?” You got fired in the Braun company. You had to have five Ws. You had to tell Who, What you wanted to do, Where and When, and you had to tell him Why. And if you wrote a communication and left out the Why you got fired, because Braun knew it’s complicated building an oil refinery. It can blow up...all kinds of things happen. And he knew that his communication system worked better if you always told him why. That’s a simple discipline, and boy does it work.
• Two: the use of simulators in pilot training. Here, again, abilities attenuate with disuse. Well the simulator is God’s gift because you can keep them fresh.
• Three: The system of Alcoholics Anonymous, that’s certainly a constructive use of somebody understanding psychological tendencies. I think they just wandered into it, as a matter of fact, so you can regard it as kind of an evolutionary outcome. But just because they’ve wandered into it doesn’t mean you can’t invent its equivalent when you need it for a good purpose.
• Four: Clinical training in medical schools: here’s a profoundly correct way of understanding psychology. The standard practice is watch one, do one, teach one. Boy does that pound in what you want pounded in. Again, the consistency and commitment tendency. And that is a profoundly correct way to teach clinical medicine.
• Five: The rules of the U.S. Constitutional Convention: totally secret, no vote until the whole vote, then just one vote on the whole Constitution. Very clever psychological rules, and if they had a different procedure, everybody would’ve been pushed into a corner by his own pronouncements and his own oratory and his own... And no recorded votes until the last one. And they got it through by a whisker with those wise rules. We wouldn’t have had the Constitution if our forefathers hadn’t been so psychologically acute. And look at the crowd we got now.
• Six: the use of granny’s rule. I love this. One of the psychologists who works for the Center gets paid a fortune running around America, and he teaches executives to manipulate themselves. Now granny’s rule is you don’t get the ice cream unless you eat your carrots. Well granny was a very wise woman. That is a very good system. And so this guy, a very eminent psychologist, he runs around the country telling executives to organize their day so they force themselves to do what’s unpleasant and important by doing that first, and then rewarding themselves with something they really like doing. He is profoundly correct.
• Seven: the Harvard Business School’s emphasis on decision trees. When I was young and foolish I used to laugh at the Harvard Business School. I said, “They’re teaching 28-year-old people that high school algebra works in real life?” We’re talking about elementary probability. But later I wised up and I realized that it was very important that they do that, and better late than never.
• Eight: the use of post-mortems at Johnson & Johnson. At most corporations if you make an acquisition and it turns out to be a disaster, all the paperwork and presentations that caused the dumb acquisition to be made are quickly forgotten. You’ve got denial, you’ve got everything in the world. You’ve got Pavlovian association tendency. Nobody even wants to even be associated with the damned thing or even mention it. At Johnson & Johnson, they make everybody revisit their old acquisitions and wade through the presentations. That is a very smart thing to do. And by the way, I do the same thing routinely.
• Nine: the great example of Charles Darwin is he avoided confirmation bias. Darwin probably changed my life because I’m a biography nut, and when I found out the way he always paid extra attention to the disconfirming evidence and all these little psychological tricks. I also found out that he wasn’t very smart by the ordinary standards of human acuity, yet there he is buried in Westminster Abbey. That’s not where I’m going, I’ll tell you. And I said, “My God, here’s a guy that, by all objective evidence, is not nearly as smart as I am and he’s in Westminster Abbey? He must have tricks I should learn.” And I started wearing little hair shirts like Darwin to try and train myself out of these subconscious psychological tendencies that cause so many errors. It didn’t work perfectly, as you can tell from listening to this talk, but it would’ve been even worse if I hadn’t done what I did. And you can know these psychological tendencies and avoid being the patsy of all the people that are trying to manipulate you to your disadvantage, like Sam Walton. Sam Walton won’t let a purchasing agent take a handkerchief from a salesman. He knows how powerful the subconscious reciprocation tendency is. That is a profoundly correct way for Sam Walton to behave.
• Ten: Then there is the Warren Buffett rule for open-outcry auctions: don’t go. We don’t go to the closed-bid auctions too because they...that’s a counter-productive way to do things ordinarily for a different reason, which Zeckhauser would understand. 4. Four: What special knowledge problems lie buried in the thought system indicated by the list? Well one is paradox. Now we’re talking about a type of human wisdom that the more people learn about it, the more attenuated the wisdom gets. That’s an intrinsically paradoxical kind of wisdom. But we have paradox in mathematics and we don’t give up mathematics. I say damn the paradox. This stuff is wonderfully useful. And by the way, the granny’s rule, when you apply it to yourself, is sort of a paradox in a paradox. The manipulation still works even though you know you’re doing it. And I’ve seen that done by one person to another.
I drew this beautiful woman as my dinner partner a few years ago, and I’d never seen her before. Well, she’s married to prominent Angelino, and she sat down next to me and she turned her beautiful face up and she said, “Charlie,” she said, “What one word accounts for your remarkable success in life?” And I knew I was being manipulated and that she’d done this before, and I just loved it. I mean I never see this woman without a little lift in my spirits. And by the way I told her I was rational. You’ll have to judge yourself whether that’s true. I may be demonstrating some psychological tendency I hadn’t planned on demonstrating.
How should the best parts of psychology and economics interrelate in an enlightened economist's mind? Two views: that’s the thermodynamics model. You know, you can’t derive thermodynamics from plutonium, gravity and laws of mechanics, even though it’s a lot of little particles interacting. And here is this wonderful truth that you can sort of develop on your own, which is thermodynamics. And some economists -- and I think Milton Friedman is in this group, but I may be wrong on that -- sort of like the thermodynamics model. I think Milton Friedman, who has a Nobel prize, is probably a little wrong on that. I think the thermodynamics analogy is over-strained. I think knowledge from these different soft sciences have to be reconciled to eliminate conflict. After all, there’s nothing in thermodynamics that’s inconsistent with Newtonian mechanics and gravity, and I think that some of these economic theories are not totally consistent with other knowledge, and they have to be bent. And I think that these behavioral economics...or economists are probably the ones that are bending them in the correct direction.
Now my prediction is when the economists take a little psychology into account that the reconciliation will be quite endurable. And here my model is the procession of the equinoxes. The world would be simpler for a long-term climatologist if the angle of the axis of the Earth’s rotation, compared to the plane of the Euclyptic, were absolutely fixed. But it isn’t fixed. Over every 40,000 years or so there’s this little wobble, and that has pronounced long-term effects. Well in many cases what psychology is going to add is just a little wobble, and it will be endurable. Here I quote another hero of mine, which of course is Einstein, where he said, “The Lord is subtle, but not malicious.” And I don’t think it’s going to be that hard to bend economics a little to accommodate what’s right in psychology.
5. Fifth: The final question is: If the thought system indicated by this list of psychological tendencies has great value not recognized and employed, what should the educational system do about it?
I am not going to answer that one now. I like leaving a little mystery. Have I used up all the time so there’s no time for questions?
I think that what we’re going to do is we’re going to borrow a little bit of time from the end of the day questions, and we’re going to move it and allocate it to Charles Munger, if that's acceptable to everybody.
By the way, the dean of the Stanford Law School is here today, Paul Brest, and he is trying to create a course at the Stanford Law School that tries to work stuff similar to this into worldly wisdom for lawyers, which I regard as a profoundly good idea, and he wrote an article about it, and you’ll be given a copy along with Cialdini’s book. [The article Mr. Munger is referring to is called "On Teaching Professional Judgment" by Paul Brest and Linda Krieger. It was published in the July 1994 edition of the Washington Law Review.] Questions?
Audience Member #1:
Will we be able to get a copy of that list of 24 [standard causes of human misjudgment]?
Yes. I presumed there would be one curious man [laughter], and I have it and I’ll put it over there on the table, but don’t take more than one, because I didn’t anticipate such a big crowd. And if we run short, I’m sure the Center is up to making other copies.
Audience Member #2:
If I had listened to this talk I might have thought that Charles Munger was a psychology professor operating in a business school. Every once in a while a micro-issue -- you told us how you would’ve deal with one of these issues, for example with the unfortunate lady See’s -- but you didn’t tell us how these tendencies affected you and what’s probably the most important, or one of the most important elements of your success, which was deciding where to invest your money. And I’m wondering if you might relate some of these principles to some of your past decisions that way.
Well of course an investment decision in the common stock of a company frequently involves a whole lot of factors interacting. Usually, of course, there’s one big, simple model, and a lot of those models are microeconomic. And I have a little list of -- it wouldn’t be nearly 24, of those -- but I don’t have time for that one. And I don’t have too much interest in teaching other people how to get rich. And that isn’t because I fear the competition or anything like that -- Warren has always been very open about what he’s learned, and I share that ethos. My personal behavior model is Lord Keynes: I wanted to get rich so I could be independent, and so I could do other things like give talks on the intersection of psychology and economics. I didn’t want to turn it into a total obsession.
Audience Member #3:
Out of those 24, could you tell us the one rule that’s most important?
I would say the one thing that causes the most trouble is when you combine a bunch of these together, you get this lollapalooza effect. And again, if you read the psychology textbooks, they don’t discuss how these things combine, at least not very much. Do they multiply? Do they add? How does it work? You’d think it’d be just an automatic subject for research, but it doesn’t seem to turn the psychology establishment on. I think this is a man from Mars approach to psychology.
I just reached in and took what I thought I had to have. That is a different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That’s what Jacob Viner, the great economist called it: the truffle hound -- an animal so bred and trained for one narrow purpose that he wasn’t much good at anything else, and that is the reward system in a lot of academic departments. It is not necessarily for the good. It may be fine if you want new drugs or something. You want people stunted in a lot of different directions so they can grow in one narrow direction, but I don’t think it’s good teaching psychology to the masses. In fact, I think it’s terrible.
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