Charlie Munger's favorite book on Human Behavior is Influence by Robert Cialdini.
Here are my 14 most important Takeaways:
1. Automatic Behavior Patterns - We use stereotypes as shortcuts, and by and large, they help us.
But they can also work against us: Expensive = Good
2. Reasoning Fallacy - Phrases like "because" even work when no sensible reason follows.
3. The Contrast Principle - A flaw in human perception that affects how we see differences between two things presented one after another.
If the second item is fairly different from the first, we overestimate the difference: Hot Water / Cold Water
4. The Rule of Reciprocation - We feel obliged to repay, in kind, what another person has provided us.
Learning: It pays to be kind!
5. Commitment and Consistency - We feel pressure to behave consistently with our commitments.
After buying a stock, you feel more confident in its outlook.
6. The Power of Writing - Writing something down has an extremely committing power.
Learning: Write down things that matter to you!
7. The Power of Public Statements - Due to our commitment bias, we strongly hold on to publicly made statements.
Use this for the good and make things public that you really want to commit to.
8. The Principle of Authority - Another shortcut is to follow the lead of credible, knowledgeable experts.
This is totally reasonable 90% of the time. But pay attention to the other 10%.
Looking for incentives is the best way to avoid the 10%.
9. Foolish Consistencies - One last thing about consistency and commitment:
"A foolish consistency is the hobgoblin of little minds." - Ralph Waldo Emerson
10. Social Proof - We tend to look to the actions and behaviors of others to determine our own.
11. The Risk of Social Proof - The greater the number of people who find any idea correct, the more the idea will be correct.
Without any consideration of reason.
12. Automatic Pilot - Automatic Pilot Devices, like social proof, should never be trusted fully.
13. Scarcity - Opportunities seem more valuable to us when their availability is limited.
14. Shortcuts - Most of the above-mentioned biases and tendencies are based on our need for shortcuts.
Shortcuts are helpful and needed in today's world. But sometimes, we should pause and question them.
Here are my 14 most important Takeaways:
1. Automatic Behavior Patterns - We use stereotypes as shortcuts, and by and large, they help us.
But they can also work against us: Expensive = Good
2. Reasoning Fallacy - Phrases like "because" even work when no sensible reason follows.
3. The Contrast Principle - A flaw in human perception that affects how we see differences between two things presented one after another.
If the second item is fairly different from the first, we overestimate the difference: Hot Water / Cold Water
4. The Rule of Reciprocation - We feel obliged to repay, in kind, what another person has provided us.
Learning: It pays to be kind!
5. Commitment and Consistency - We feel pressure to behave consistently with our commitments.
After buying a stock, you feel more confident in its outlook.
6. The Power of Writing - Writing something down has an extremely committing power.
Learning: Write down things that matter to you!
7. The Power of Public Statements - Due to our commitment bias, we strongly hold on to publicly made statements.
Use this for the good and make things public that you really want to commit to.
8. The Principle of Authority - Another shortcut is to follow the lead of credible, knowledgeable experts.
This is totally reasonable 90% of the time. But pay attention to the other 10%.
Looking for incentives is the best way to avoid the 10%.
9. Foolish Consistencies - One last thing about consistency and commitment:
"A foolish consistency is the hobgoblin of little minds." - Ralph Waldo Emerson
10. Social Proof - We tend to look to the actions and behaviors of others to determine our own.
11. The Risk of Social Proof - The greater the number of people who find any idea correct, the more the idea will be correct.
Without any consideration of reason.
12. Automatic Pilot - Automatic Pilot Devices, like social proof, should never be trusted fully.
13. Scarcity - Opportunities seem more valuable to us when their availability is limited.
14. Shortcuts - Most of the above-mentioned biases and tendencies are based on our need for shortcuts.
Shortcuts are helpful and needed in today's world. But sometimes, we should pause and question them.
If you lack time to find investments or want to get inspiration, check out my Website:
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danielmnke.com
- Company Deep Dives
- Investing Pitches
- An Archive of Investing Resources (1000s of free pages of investing wisdom)
- The Best Book Recommendations
danielmnke.com
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