The hallmark of an excellent professional is impeccable judgment, perhaps more so for managers. To make good judgments, one must be cognizant of human tendencies to err in a predictable and systematic way. Charlie Munger, Vice Chairman of Berkshire Hathawa and a long-time partner of Warren Buffett, the world's second richest man after Bill Gates, arrived at 25 psychological tendencies of human misjudgment, which he has presented in lectures at Caltech and Harvard, and is published in a book entitled Poor Charlie's Almanack in a chapter called The Psychology of Human Misjudgment.

In applying his construct, Munger gives lucid illustrations of historical blunders as examples. His also provides definitive antidotes to obviate making such predictable and systematic judgment errors. A professional or manager not only may apply Munger's "antidotes" to prevent one's own misjudgments; he could also transform his opponent's missteps into his own competitive advantages.

Due to the limitation of time, only highlights of Munger's 25 misjudgment tendencies will be presented. The objective of this presentation is to integrate key elements of the Buffett-Munger's legendary excellence in investment decisions in our own professional skill set.

Munger's 25 psychological tendencies for misjudgment are:

  1. Reward and Punishment Superresponse tendency

  2. Liking/Loving Tendency

  3. Disliking/Hating Tendency

  4. Doubt-Avoidance Tendency

  5. Inconsistency-Avoidance Tendency

  6. Curiosity Tendency

  7. Kantian Fairness Tendency

  8. Envy/Jealousy Tendency

  9. Reciprocation Tendency

  10. Influence-from-Mere-Association Tendency

  11. Simple, Pain-Avoiding Psychological Denial

  12. Excessive Self-Regard Tendency

  13. Overoptimism Tendency

  14. Deprival-Superreaction Tendency

  15. Social-Proof Tendency

  16. Contrast-Misreaction Tendency

  17. Stress-Influence Tendency

  18. Availability-Misweighing Tendency

  19. Use-It-or-Lose-It Tendency

  20. Drug-Misinfluence Tendency

  21. Senescence-Misinfluence Tendency

  22. Authority-Misinfluence Tendency

  23. Twaddle Tendency

  24. Reason-Respecting Tendency

  25. Lollapalooza Tendency

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