25 Cognitive Biases

25 Cognitive
Biases - "The
Psychology of
Human
Misjudgment"
THE 25 COGNITIVE BIASES USED BY CHARLIE MUNGER
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Bias 1 – Reward and
Punishment Super-Response
Tendency
The power that incentives and disincentives have on the actions of others
cannot be overstated. Munger says this should be obvious but so many
people don’t understand the how important incentives are for shaping people’s
motivation to complete a task. Incentives and disincentives are extremely
important in changing behavior. Just follow Benjamin Franklin’s Maxim: “If you
would persuade, appeal to…
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Bias 2 – Liking/Loving
Tendency
We ignore the faults of other people, products or companies that we admire.
According to Charlie Munger, a newly arrived human is born to like and love,
and the strongest inborn tendency to love is that of a mother for its child.
Liking/Loving tendency makes the liker or lover tend to: To ignore the faults of,
and comply with wishes…
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Bias 3 – Disliking/Hating
Tendency
We also ignore the virtues of those things we dislike and distort the facts to
facilitate that hatred while putting on blinders to other options and opinions.
Disliking/Hating Tendency happens from the time the newly arrived human is
also born to “dislike and hate” 1) Ignore the virtues in the object of dislike. 2)
Dislike people products and actions merely…
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Bias 4 – Doubt-Avoidance
Tendency
If we are unsure about a decision we try to quickly remove any doubt by
making an ill-informed, quick decision, this is doubt-avoidance tendency
Doubt-avoidance tendenty is triggered by some combination of puzzlement
and stress.
Bias 5 – Inconsistency-
Avoidance Tendency
We have a reluctance to change. Eliminating bad habits is a rare trait. The
brain of man conserves programming space by being reluctant to change,
which is a form of inconsistency avoidance. Factors that create an anti-
change and Inconsistency Avoidance Tendency mode in humans: It facilitated
faster decisions when speed of decision was an important contribution to the
survival on…
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Bias 6 – Curiosity Tendency

There is not enough curiosity to learn, even though you receive so many
benefits from a continuous learning process. Munger says, “the curious are
also provided with much fun and wisdom once formal education has ended.”
Curiosity tendency has been one of the main drivers in human progress
throughout history, the amount of curiosity in the human species is much…
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Bias 7 – Kantian Fairness
Tendency
Life isn’t fair, but many can’t accept this. Tolerating a little unfairness should
be okay if it means a greater fairness for all. The example Munger uses is
letting in other drivers on the freeway knowing they will reciprocate in the
future. Kantian Fairness Tendency Kant’s “Categorical imperative” or golden
rules consists of humans require to follow those behavior patterns…
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Bias 8 – Envy/Jealousy
Tendency
Self-explanatory, but Munger makes an interesting point that envy/jealously
tendency is surprisingly absent from most Psychology textbooks.
Envy/jealously tendency comes from the need to get often-scarce food, this
occurs often when the food is seen in possesion of another member of the
same species “it is not greed that drives the world, but envy” – Warren Buffet
Bias 9 – Reciprocation
Tendency
In reciprocation tendency, we tend to want to return the favor when someone
helps us, which can be a good thing at times, but it can also lead to poor
decisions if you reciprocate business deals based on these minor favors.
Bias 10 – Influence-From-
Mere-Association Tendency
We can be easily manipulated by mere association. It can be a group of
people, the quality of a product, advertising, etc.
Bias 11 – Simple, Pain-
Avoiding Psychological Denial
We have a habit of distorting the facts until they become bearable for our own
views.
Bias 12 – Excessive Self-

Regard Tendency
We all think we’re above average. This is where overconfidence comes from.
Munger says the greatest type of pride should be taking pride in being
trustworthy to avoid developing an ego. This is the sickness of dictators…
Bias 13 – Over-Optimism
Tendency
Over-optimism bias usually shows that excess of optimism is the normal
human condition
Bias 14 – Deprival-
Superreaction Tendency
Deprival-Superreaction in a way is loss aversion. Loss aversion refers to
people’s tendency to strongly prefer avoiding losses to acquiring gains. Most
studies suggest that losses are twice as powerful, psychologically, as gains. A
man ordinarily reacts with irrational intensity to even a small loss, or
threatened loss, of property, love, friendship, dominated territory, opportunity,
status or any other valued…
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Bias 15 – Social-Proof
Tendency
Social-Proof Tendency is an automatic tendency to think and act as others
around think and act
Bias 16 – Contrast-Misreaction
Tendency
25 Cognitive Biases – Bias 16 Contrast-Misreaction Tendency Our problem
here is a misunderstanding of comparisons and missing out on the magnitude
of decisions, it is better to evaluate people and objects by themselves and not
by their contrast. An example of Contrast Misreaction Tendency Contrast
Misreaction Tendency is routinely used to cause disadvantge for a customer,
making an ordinary…
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Bias 17 – Stress-Influence
Tendency
Adrenaline tends to produce faster and more extreme reactions. Some stress
can improve performance but heavy stress often leads to dysfunction.
Bias 18 – Availability-
Misweighing Tendency
We overweight what’s easily available. A checklist or set of rules can help with
this tendency. Man’s imperfect, limited-capacity brain easily drifts into working
with what’s easily available to it. And the brain can’t use what it can’t
remember or what it is blocked from recognizing because it is heavily
influenced by one or more psychological tendencies bearing strongly on…
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Bias 19 – Use-it-or-Lose-It
Tendency
Too many learn a skill to simply cram for a test or presentation instead of
trying to actually understand it fluently Skills attenuate with disuse.
Throughout his life, a wise man engages in practice for all his useful, rarely
used skills, may of them outside his discipline, as a sort of duty to his better
self. Skills of a very…
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Bias 20 – Drug-Misinfluence
Tendency
This is a very strong tendency that costs lives. It can only be supplemented by
Simple pain-avoiding psychological denial
Bias 21 – Senescence-
Misinfluence Tendency
As we age there is a natural loss of certain skills and abilities. Continuous
thinking and learning helps to slow the decay.
Bias 22 – Authority-
Misinfluence Tendency
Following orders just because someone says so. Living in dominance
hierarchies as he does, man was born mostly to follow leaders, with only a
few people doing the leading. And so, human society is formaly organized into
dominance hierarchies.
Bias 23 – Twaddle Tendency
This is basically spending too much time on nonsense
Bias 24 – Reason –
Respecting Tendency
Bias 25 – Lollapalooza
Tendency
The Tendency to Get Extreme Confluences of Psychological Tendencies
Acting in Favor of a Particular Outcome

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Bias 6 – Curiosity Tendency

Bias 12 – Excessive Self-

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