September 22, 2014

Mental Model: The Drunkard’s Search

Charlie Munger Mental Models

By adding concepts to what Charlie Munger calls his "mental model" collection, one can take advantage of them (or guard against them) throughout life.

The Drunkard’s Search: The tendency for people to search in the easiest places, rather than the ones that are the most likely to yield results.  The name comes from the idea of a drunkard seeking his car keys under a street lamp because the light is better instead of where he most likely lost them.

The drunkard’s search manifests itself constantly.

I think there is an argument to be made that the drunkard’s search concept can be expanded into behavioral economics.  For example, with the Great Recession of 2007-2009, one need look no further than the job market.  Most people are looking for work in the same communities where the factories have closed, the businesses are shuttered, and the wealthy fled long ago.  Why?  Because it is convenient, their children are enrolled in the local school district, and they own a house in the community.  Rather than looking for the best long-term solution to the problem and then moving across the country to areas where jobs are not scarce, they continue to hug the street lamp and insist there are “no jobs”.  They refuse, either through ignorance, stupidity, or denial, to realize there are no jobs next to this particular street lamp but there are plenty elsewhere.

Likewise, studies have shown that many millionaires in the United States researched and sought out lucrative businesses before entering them, rather than just stumbling upon a profitable industry.  This is unique because the human tendency is for individuals to look for industries they understand.  For example, the AP story I wrote about several years ago where a group of steel mill workers bought a steel plant, couldn’t make it work, and then killed themselves.  When they had escaped their former employer, instead of entering a more lucrative field, they went right back into a terrible industry where the odds were against them because it was “well illuminated” to them due to their experiences.

Life is better (and the economic rewards richer) when one grabs a flashlight and goes down the dark alley searching for treasure.

Note: Mental models are a technique espoused by Charlie Munger wherein one catalogs and studies models of behavior in psychology, economics, and other disciplines for the purpose of using them to your advantage or guarding against them in business or life.  This approach has had an extraordinarily positive influence on my standard of living, the enjoyment I get out of life, and my effectiveness as an investor.  From time to time, you will see me add new mental models to a category on the site for my own benefit.  You are, of course, free to read them but they are primarily there for my own reference.

  • http://ianhfrancis.wordpress.org Ian Francis

    I think this stems from a pre-societal mindset. In nature you always want to do what takes the least energy since food was generally scarce. In nature, lack of food ignites people’s drive to survive and they pick up and find something better. Today almost no one in this country is truly hungry, and while losing a house or car or all of your worldly posessions is devestating, it doesn’t spur that drive in people to correct the situation. So while their locucal brain is telling them there is a problem, their emotional brain is not. And then it all comes down to which part of the brain do you rely on when making decisions. I am pretty sure I know your answer, but from
    my experience most people rely on their emotions to make decisions.

    • http://www.joshuakennon.com Joshua Kennon

      I think you’re correct. I just ordered a book from Amazon called The Science of Good and Evil: Why People Cheat, Gossip, Care, Share, and Follow the Golden Rule. It is supposedly an argument that what we consider morality, vice, sin, and virtue are really evolutionary adaptations that ensured combined survival and thus became part of our species’ fundamental societal composite. I haven’t read it yet (it should arrive today), but it at least sounds like an interesting hypothesis.

      BTW: The Amazon Prime feature, which cost like $80 per year but gives you 2-day shipping one everything, including Saturday delivery, is *COMPLETELY* worth it. I thought it would be a rip-off but I ended up trying it and now I buy far more stuff from amazon than I ever did in the past. The savings paid for themselves in a month. The only problem is they don’t sell the imported Japanese piano scores of Final Fantasy, Kingdom Hearts, and the other video games.