Aug 12, 2016

The Crazy-Long Checklist of Mental Models #1

I wrote a couple days ago about how I want to start keeping checklists to help me make better decisions. So I’m starting with the first group, which is the list of psychological biases Charlie Munger uses in Poor Charlie’s Almanack in The Psychology of Human Misjudgment, and much of this is cribbed directly from the text. Here’s hoping that this is a start on not making those mistakes again:

Reward and Punishment Superresponse Tendency: We tend to drastically underestimate the effect of incentives (good and bad) on people’s outcomes, and we should pay heed to Ben Franklin’s advice that “If you would to persuade, appeal to interest and not to reason.” He also notes that, “To a man with only a hammer, every problem looks pretty much like a nail.” The biggest point here is that you have to examine all of the incentives in a program you create, including your own incentives in designing it in the first place to figure out if you’re being wrong-headed in your evaluation of other people’s incentives.
Liking/Loving Tendency: A man will strive for the affection and approval of people not related to him, which acts as a conditioning device to make him ignore faults of the object of his affection, comply with the wishes of said object, favor people, products and actions that are associated with the object, and to distort other facts to facilitate ongoing love. So if you already have something that people love, use that to sell them other stuff.
Disliking/Hating Tendency: This is the opposite of Liking/Loving tendency, which makes the hater ignore virtues in whomever he dislikes, dislike anything merely associated with the object he dislikes, and distort facts to facilitate hatred. So if someone hates you, maybe it’s better to avoid them and find the people who love you instead.
Doubt-Avoidance Tendency: Our brains are programmed with a tendency to quickly remove doubt by reaching some decision, and so it is important to always pause before making any decision to ensure that all relevant options are evaluated fully.
Inconsitency-Avoidance Tendency: We are reluctant to change any of our decisions or habits, but “an ounce of prevention is worth a pound of cure.” Furthermore, we don’t like to accept new ideas if they are inconsistent with our current ideas and worldview. We reach our first conclusion and stick with it — Ben Franklin exploited this by asking people he didn’t know for a meaningless favor, such as borrowing a book, because he know that would pre-dispose people to like him in the future (after all, if you do someone a favor, you must like them). So, when making a product, it’s beneficial to try and get customers to reach a conclusion about it quickly, but when making a decision out what would make people reach a conclusion quickly, we should research it thoroughly.
Curiosity Tendency: Being curious helps you avoid bad tendencies in your own decision-making; a corollary may be that piquing curiosity is a good way to sell a product.
Kantian Fairness Tendency: People often operate via a sort of “golden rule” in which people follow behavior patterns that, if followed by all others, would make the system work best for everybody. So, if you’re obviously being unfair to some people, that just doesn’t sit well.
Envy/Jealousy Tendency: There seems to be a taboo on saying that people do things because they’re envious or jealous, despite the fact that they clearly do. As Warren Buffett says, “It is not greed that drives the world, but envy.” So if you’re making something to sell, make something that other people will envy.
Reciprocation Tendency: People are extreme in both returning favors and disfavors, and this is one of the easiest behaviors that people exploit (for example, a car salesman might give you a cup of coffee to ingratiate himself to you). The antidote? Don’t accept favors, because concessions lead to other concessions in your own decision-making. However, when selling, do the other person a favor (or two). On a positive note, this also causes people to want to please others more than they want to be pleased themselves.
Influence-from-Mere-Association Tendency: People tend to like things that they think are expensive, and they associate expense with both price and packaging. People are also guilty of thinking themselves successful because of accidental, non-causative factors associated with past success (e.g., luck). To cover against this, look for dangerous aspects of the new undertaking that were not present when past successes occurered. Avoid being a bearer of bad news in consumer applications, and build a culture of applauding bravery in presenting bad news in an organization. Finally, this tendency also causes bad judgment due to stereotypes.
Simple, Pain-Avoiding Psychological Denial: If reality is too painful to bear, people will distort facts until they become bearable. We should keep in mind that, “It is not necessary to hope in order to persevere.”
Excessive Self-Regard Tendency: People usually mis-appraise themselves on the high side, and such appraisal also apply to a person’s possessions — things become worth more to you once you own them. This also causes people to think that their decisions are better immediately after they’ve made them (the “endowment effect”). This also makes people strongly prefer people that they view as like themselves. People will also forgive themselves for mistakes that they have made because they will blame it on their circumstances, but: (a) fixable but unfixed bad performance is bad character and tends to create more of itself, causing more damage to the excuse-giver; and (b) in demanding places, you are almost sure to be discarded if you keep giving excuses instead of behaving as you should. The antidote is to force yourself to be more objective when thinking about yourself (e.g., by applying these checklists!).
Overoptimism Tendency: “What a man wishes, that also he will believe.” An excess of optimism is a normal human condition, and this is solved through the use of basic statistical analysis.
Deprival-Superreaction Tendency: The quantity of pleasure you get from a $10 gain isn’t exactly the same as the quantity of displeasure from a $10 loss, and people will react to a loss of something they almost had just like they would if they had had it all along. This is a main driver that makes people gamble, because they feel as if the ‘almost’ had it.
Social-Proof Tendency: We have an automatic tendency to think and ack as we see others around us thinking and acting. This, coupled with discomfort from doubt, makes people make decisions quickly, especially in the presence of puzzlement or stress. Social proof applies to both action and inaction. The best way to avoid this is to learn to avoid the examples of others when you know that they are wrong.
Contrast-Misreaction Tendency: We look primarily at contrast when we see things, and this happens in other areas, such as buying an add-on that seems inexpensive only in relation to the price of the main product. When every step you take along the way is small, you tend to miss the oncoming end-point that you wouldn’t have wanted in the first place. This is because each small step barely contrasts with the one before it. In order to fix this, look for the small leaks in a big ship.
Stress-Influence Tendency: Heavy stress can cause mental breakdowns (or tectonic shifts in someone’s viewpoint), while minor amounts of stress can improve performance.
Availability-Misweighting Tendency: “When I’m not near the girl I love, I love the one I’m near.” We tend to work with what’s easily available to us; this can be solved via procedures and checklists, and through the emphasis of disconfirming evidence. An idea or a fact is not worth more mere because it is easily available to you.
Use-It-or-Lose-It Tendency: All skills attenuate with disuse, and the solution to fix this is to continuously practice the skills you need in life, including skills that are rarely used. When gaining a new skill, it is best to get to a level of fluency in that skill, as it is easier to maintain if you’re fluent.
Drug-Misinfluence Tendency: Drugs screw you up. Don’t do them.
Senescence-Misinfluence Tendency: Continuous thinking and learning, done with joy, can delay the inevitable effects of old age.
Authority-Misinfluence Tendency: People automatically follow leaders, but we suffer when the leader is wrong, communicates poorly or is ineffective. To stop yourself from following someone who is leading you down the wrong path, use a checklist.
Twaddle Tendency: Some people talk a little, and some talk a lot, but it’s awfully hard to get serious work done when you’re talking aimlessly.
Reason-Respecting Tendency: Ideas get through best when reasons for the idea are laid out meticulously. Unfortunately, this will mean that ideas will also get through when meaningless or incorrect reasons are given.
Lollapalooza Tendency: This is the tendency to get extreme consequences from confluences of individual tendencies in favor of a particular outcome. It’s likely that any major psychological effect is a result of multiple tendencies acting at once, which is why a checklist will help people make sense of what is actually going on.