By Charlie Munger (Warren Buffett’s partner at Berkshire Hathaway)
Speech at Harvard Law School (1995)
Transcription of The Psychology of Human Misjudgment, comments [in brackets] by Whitney Tilson. Note from Joshua Kennon: I’ve written a lot about Charlie Munger over the years, especially the influence he has had on my life and how we run my companies by using our own mental models. This is one of the best speeches Munger ever gave … which may be why my family owns about a dozen copies of various editions of Poor Charlie’s Alamanack, including an autographed first edition that sits in my office.
Charles Munger, Vice Chairman of Berkshire Hathaway
Charlie Munger: Although I am very interested in the subject of human misjudgment — and lord knows I’ve created a good bit of it — I don’t think I’ve created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with.
When I saw this patterned irrationality, which was so extreme, and I had no theory or anything to deal with it, but I could see that it was extreme, and I could see that it was patterned, I just started to create my own system of psychology, partly by casual reading, but largely from personal experience, and I used that pattern to help me get through life. Fairly late in life I stumbled into this book, Influence, by a psychologist named Bob Cialdini, who became a super-tenured hotshot on a 2,000-person faculty at a very young age. And he wrote this book, which has now sold 300-odd thousand copies, which is remarkable for somebody. Well, it’s an academic book aimed at a popular audience that filled in a lot of holes in my crude system. In those holes it filled in, I thought I had a system that was a good-working tool, and I’d like to share that one with you.
And I came here because behavioral economics. How could economics not be behavioral? If it isn’t behavioral, what the hell is it? (more…)
