📈🧠 In 1995, Charlie Munger, the renowned investor and Vice Chairman of Berkshire Hathaway, delivered a legendary lecture at Harvard not about investment strategies, but about the mental flaws that affect business decisions.
Charlie Munger’s Investment Wisdom: Top 10 Mental Flaws to Avoid for Success!
In this blog/podcast/video, we unravel Munger’s insightful guidance on avoiding cognitive biases and mental errors that can skew decision-making. Munger’s principles go beyond investing; they offer a blueprint for making smarter decisions in business and life.
🔍 What you’ll learn:
Overreaction to Loss: Understand why focusing too much on avoiding loss can lead to missing significant opportunities.
Inconsistency-Avoidance: How clinging to beliefs can blind you to vital information.
Availability-Misweighing: The dangers of oversimplifying complex situations.
Twaddle Tendency: Recognizing when information is fabricated or exaggerated.
Social-Proof Bias: The risk of following the crowd blindly.
Overoptimism Tendency: Managing unrealistic expectations and assessing risks accurately.
Reward and Punishment Superresponse: The underestimated influence of incentives in decision-making.
Pain-Avoiding Psychological Denial: The tendency to distort reality to protect the ego.
Influence-from-Association: Avoiding negative bias based on association.
Lollapalooza Tendency: Identifying when multiple mental flaws combine to create extreme outcomes.
Munger’s wisdom is a key to unlocking exceptional decision-making skills, as evidenced by his success with Berkshire Hathaway.
Join us as we delve into each of these principles, providing real-world examples and actionable insights. Share your thoughts and experiences in the comments below! #CharlieMunger #InvestmentPrinciples #CognitiveBiases #BusinessWisdom #BerkshireHathaway”
So, back in 1995, Harvard University invited Charlie Munger to give a lecture to its students. Now, one might assume that Munger, being the Vice Chairman of Berkshire Hathaway and a highly respected figure in investing, would impart valuable insights on how to excel in the world of finance. But interestingly enough, Munger had a different approach. He focused on something far more important than investing advice – he delved into the realm of mental flaws that affect every single business decision we make.
See, our brains are fascinating organs that constantly take shortcuts when it comes to decision-making. It’s just the way we’re wired. But here’s the kicker – these shortcuts often lead us astray, tricking us into believing that our flawed thinking is actually accurate. So, what Munger recognized was that avoiding these mental flaws was the key to his success in building Berkshire Hathaway.
In Munger’s most famous lecture, he emphasized the significance of being able to see and, importantly, avoid these mental flaws. He believed that it was more critical than any specific investing advice he could give. So, what were these mental flaws that Munger warned his Harvard students about? Let’s dive into the ten most critical ones.
The first flaw is the overreaction to loss. We have a tendency to overemphasize loss rather than focusing on potential gains. Munger advised his students not to miss out on a big opportunity just because they wanted to avoid a small loss.
The second flaw is inconsistency-avoidance. When we hold a belief, we tend to identify with it strongly. As a result, any information that clashes with our beliefs appears twisted or distorted. Munger urged his students to see information for what it truly is, without letting their preexisting beliefs cloud their judgment.
Next up is availability-misweighing. Munger pointed out that the simplest answers to complex situations often become viral and widely accepted. However, just because others provide a single explanation for why something happens, it doesn’t mean that the whole picture has been revealed. Munger encouraged his students to assume that they could be missing important information whenever they are presented with only one response.
The fourth mental flaw is what Munger called the “twaddle tendency.” People have a knack for making things up as they go along, especially when they want to appear more intelligent than they actually are. Munger advised his students to be skeptical and assume that some percentage of any given explanation is simply fabricated.
Then there’s the social-proof bias. As humans, we often tend to follow the crowd and assume that popular ideas must be true. But Munger cautioned against this tendency, reminding his students that popularity doesn’t equate to accuracy. It’s important to think critically and not blindly follow the masses.
Moving on to the sixth flaw, Munger highlighted the overoptimism tendency. We humans have a tendency to be overly optimistic, which can cloud our judgment and make it difficult for us to accurately assess risks. Munger advised his students to seek a third-party perspective to evaluate the downside risks of their decisions.
The seventh mental flaw is what Munger termed the “reward and punishment superresponse.” Essentially, we underestimate the impact that incentives have on driving behavior. Before working with others, it’s crucial to understand their incentives and motivations.
Next up is the pain-avoiding psychological denial. When faced with an uncomfortable truth, we often skew our perception of reality to avoid the pain that accompanies it. While this may protect our ego in the short term, it ultimately hampers our decision-making process. Munger encouraged his students to confront uncomfortable truths head-on and base decisions on accurate information.
Influence-from-association is another mental flaw Munger highlighted. Essentially, when we associate an idea with something negative, we automatically assume that the idea itself is bad. Munger advised his students to look for valuable lessons even in ideas that others tend to avoid due to negative associations.
Lastly, there’s the lollapalooza tendency. When multiple mental flaws come into play together, they can amplify each other and lead to extreme outcomes. Munger urged his students to be vigilant for situations where multiple flaws might be at work, as they can significantly impact the logic behind decisions.
Now, here’s the thing – most people are not fully aware of just how much these mental flaws skew their decision-making processes. But Munger, with his exceptional ability to recognize and confront these flaws, was able to build Berkshire Hathaway into a powerhouse. So, the key takeaway here is to protect against these mental flaws in your own decision-making. By doing so, you can elevate yourself to the level of a top-notch decision-maker, just like Munger.
And with that, we’ve covered the ten critical mental flaws that Charlie Munger warned his Harvard students about. These flaws have the potential to significantly impact our decision-making, so it’s essential to be aware of them and actively work to counteract their influence.
Remember, decision-making is a multifaceted process, and understanding the common pitfalls can help us make better choices in both our personal and professional lives. So, take Munger’s wisdom to heart, and may your decision-making skills soar to new heights!
Oh, do I have a book recommendation for you! If you’re itching to delve deeper into the realm of artificial intelligence for investing, then look no further than “AI Unraveled: Demystifying Frequently Asked Questions on Artificial Intelligence.” Trust me, this book is an absolute must-read for anyone seeking to expand their understanding of AI in the world of investments.
And the best part is, you can easily get your hands on a copy! “AI Unraveled” is conveniently available for purchase on popular platforms like Etsy, Shopify, Apple, Google, and of course, Amazon. So, no matter which one you prefer, you can easily snag a copy and dive right into this treasure trove of knowledge.
What sets “AI Unraveled” apart from other books on the subject is its ability to demystify the frequently asked questions surrounding artificial intelligence. It’s not just about grasping the concepts; it’s about unraveling the mysteries and making AI approachable for everyone.
The author brilliantly breaks down complex ideas into easily digestible nuggets of information. So, whether you’re a seasoned investor or just starting out, you’ll find immense value in this book. With each turn of the page, you’ll uncover a wealth of insights that will empower you to make informed decisions in the world of AI-driven investments.
And let’s not forget the convenience of purchasing options! Whether you’re a fan of Etsy’s unique offerings, Shopify’s user-friendly interface, or the trusted platforms like Apple and Google, “AI Unraveled” is available on all of them. And of course, you can always rely on the mighty Amazon to deliver your copy right to your doorstep. The choice is yours!
So, if you’re ready to take your understanding of artificial intelligence for investing to the next level, don’t hesitate. Get yourself a copy of “AI Unraveled: Demystifying Frequently Asked Questions on Artificial Intelligence” and embark on an eye-opening journey into the world of AI-driven investments. Happy reading!
In this episode, we explored the importance of avoiding mental pitfalls in business decisions and recommended “AI Unraveled” as a comprehensive guide to AI investing. Thank you for joining us on the “Djamgatech Education” podcast, where we strive to ignite curiosity, foster lifelong learning, and keep you at the forefront of educational trends – so stay curious, stay informed, and stay tuned with Djamgatech Education!
There goes my calls https://preview.redd.it/hi7uo4ohlred1.png?width=498&format=png&auto=webp&s=3764a1ba9ed2d9edb19662c3bbe8cca373e48511 submitted by /u/Impossible_Buy_1335 [link] [comments]
Forget all analyses. Forget all fundamentals. Forget the fact that NVDA has earnings coming up. Forget the fact that they announced a new China chip. Just know these two facts: a) Cramer said everyone wants out of NVDA today b) Cathie Woods doesn’t own NVDA There are people who’ve made fortunes simply inversing Cramer especially when it comes to plays on popular stocks. Cramer said he was short NVDA during September 2022 (will post video link to this in comments). On July 9, 2024, Cramer tweeted out “Nvidia about to break out from the churn post stock split?”. The same week NVDA went from 135 to 127 and has been going down since. It will now do the opposite and I’m expecting a major pump already tomorrow on Friday. As for Cathie, as everyone knows, she sold most of her NVDA holdings when it was below $15 per share post split. And yet somehow, she gets to manage billions. NVDA 130 C 8/16 submitted by /u/btctrader12 [link] [comments]
Sold all my calls except for $15 and $10 so that I can exercise them and keep the shares. After that I’ll have 15k shares. Currently have 6k with an average of $7. Exercised a 1000 today at $10 which brought my average up. Holding till 2030. submitted by /u/foldyaup [link] [comments]
This is a play based purely on anecdotal experience in the ecommerce space. Here's the anecdotal take: I started my ecom business 7 years ago and have built it on the back of the meta ads platform. Year over year we were able to grow and increase our spend. Last year we did around 9m, with 4m spend on Meta. This year, we're down about 30% on revenue and the efficiency of our META spend is down 10%. I'm in groups with hundreds of other founders, and this is the same situation for about 80% of the members in these groups. Just head on over to r/facebookads and look at all the depressing posts lol. Ask anyone you know who works in ecom how their company is doing this year. The internal reality at Meta is that the ads platform is totally fucked up right now, more so than after the iOS update that sent the stock to $100, and barely anyone is talking about it. Google the stock and all you'll find is that 100% of analysts agree that it's a strong BUY, talking about AI and literally not mentioning the ad business (which effectively drives 100% of META revenue). In November 2022, when facebook was at $100, all the same analysts said META was dead and to stay away. Also, I'm not a TA guy, but just look at that fuckin chart. Straight up for like 20 months. Looks toppy as hell. In the 7 years of owning my business, all of my biggest pay days have come from anecdotal meta earnings call plays. This is nearly an identical situation to when the iOS update broke the ads platform while they were simultaneously blowing money on the metaverse, except nobody knows exactly what broke the ads platform (including facebook) and the multi billion dollar pit is their AI investment currently driving 0 revenue. I'm confident at the very least META EPS will be an underwhelming beat like google or a miss. They'll do damage control by saying "AI" 250+ times on the earnings call but that didn't work for Google so I don't see it working for them either. I've got 15k worth of options, positions below. This is some purely anecdotal gambling, do with it what you will. https://preview.redd.it/pe7suk8n5red1.jpg?width=1179&format=pjpg&auto=webp&s=454c14a65e4e4b003fc12a3e6071c3f5539cbc5a submitted by /u/401kLover [link] [comments]
Oh wait sorry nvm... ... all I could find... ... was just proof... ... of the opposite "ASTS is burning through money, they only have enough cash on hand for a year!" You sure about that? ASTS emergency services promotional ad followed by Robert Walls (Principal Consultant - FirstNet) followed by the increased Firstnet funding budget the majority of which is earmarked for "will fund network enhancements, including anticipated investments to expand coverage on FirstNet". Firstnet, btw is deployed through a public-private partnership between the federal government and AT&T. AT&T is a strategic investor in ASTS, has a member on their board of directors, has been working closely in collaboration with ASTS, and has already signed a definitive agreement until at least 2030. Rural 5G fund - there's no better candidate for this than ASTS Already have military testing carried out with our single test satellite Cash money - CatSE funding infographic 45+ MNO prepayments in the post! "ASTS can't compete with Starlink!" They need to have an acceptable product before they can compete Opposition filing against their shitty non-compliant satellites)) with T-mobile (their mno partner) the only one supporting CatSE highlighting SpaceX have technical problems they can't solve Omnispace SpaceX beef If you believe Elon when he says he's rolling out D2D service this year, I've got a 2019 self driving Tesla Semi, a 2021 Cybertruck, a Nueralink, and a 2024 human colony on Mars to sell you. Cramers comments on ASTS: 2022 "It's an exciting thing, not a stock" At $4 "I don't want you to touch that" at $8 "It's had too big of a move" Jim Cramer is bearish on Texas-based space-based cellular broadband network company AST SpaceMobile Inc (NASDAQ:ASTS) and recommends investors not to buy the stock. Cramer recently said that he does not see "any way shape or form that they’re going to be making money, so I’m going to have to hold off that one.” "Typical WSB. Post this when It's already pumped" KthankS14 - posting at $5 my post at $8 FootoftheBeast - posting at $11 CatSE---ApeX--- - posting at $9 Less-Ad-2769 - posting at $9 - posting at $12 - posting at $16 thekookreport - DD 3 years ago CatSE---ApeX-- - DD 2 years ago - [1] - [2] - [3] - [4] CatSE---ApeX-- - DD 1 year ago "...after it's already pumped"? let's talk money... Their MNO partners collectively service over 2.8billion people. Lets assume we address 10% of those Lets take $1 per month for ASTS per user $3.36billion/year multiplied by whatever EBITDA multiple you want. We've gone conservative so far, why stop now, let's go x10? = $130 share price. Those numbers only consider commercial cell coverage. ASTS already have military revenue, they already have interest from other goverment services. I can sell you a more realistic number, but I'm giving you a shitty easily obtainable scenario. Come on, $1 per month per user?? btw, they have a projected EBITDA of 90-98%. You can't even get that EBITDA selling cocaine. What short term catalysts are there to look forward to? CatSE's post mentioned above: https://www.reddit.com/r/wallstreetbets/comments/1d3m8ew/posted_this_here_5_days_ago_got_6_likes_up_116/ Launch date has been semi-confirmed hence the jump today "OP is just trying to dump his bags" Try again First purchases Jan 2021 I watched my investment drop 80%... then I bought more. I'll buy your bags. position1 position2 position3 I said it at $8, I'll say it again, this isn't the pump. Deep in to triple digits is where this is headed. TLDR: Not vaporware, not a p&d, wake up and smell the satellites. submitted by /u/the_blue_pil [link] [comments]
8/2 $15c, 23 contracts @ 0.40. $920 cost basis total. Sold 20 of them @ 2.05. Really didn’t want to get rid of them, took me till 3:59pm.. 1/17/25 $15c, 4 contracts @ 2.62. $1,048 cost basis total. Sold 1 of them for $510. I will add a comment with purchase history, apparently only 1 photo per post.. anyway, you’ll also see that I sold a 1/16/26 $12.5c to start picking up the weeklies, averaged up during the dips. Gonna look for re entry on that one. Mark my words, if the pump continues tomorrow then I was right, but at least I’m not regarded enough to not sell weeklies with 400% gains. $1,968 -> $6,816 submitted by /u/sicknander [link] [comments]
Made it by the skin of my nuts today. If it would have sold in the morning and reentered after lunch I woulda been up bigly. Instead I went on a roller coaster ride of emotions only to end up where I would have been if I sold and enjoyed the rest of the day. But then I wouldn’t have learned. Sold everything but a couple puts I’m letting ride and Ive been telling myself I’ll take a break and pull profits at 25k (just a psychological level for myself), and I damn sure wasn’t going to let it pass me by, let alone twice in the same day. Also switching to Schwab. HOOD is just easy for trading on the shitter. The mental battle is tough, always have a tendency to want to hold on to winners. This will do for now. Profits for a poor I know. I’ll have you know I’m a poor gay bear and I like it 😉 submitted by /u/SnooMarzipans902 [link] [comments]
Was up 6k today on SPY puts after my 14k loss on NVDA calls a week ago. Decided to roll it into more puts instead of the calls I saw everyone pumping .Doubled down on the V in denial. No way I can pay my taxes or come out ahead, would head to the Wendy’s dumpster if I didn’t have a #rope Ignore the vxx2 calls, it was a $100 hedge that I already made %100 when I was still in QQQ, trying to liquidate my last few options. Might do 6k into a LEAP tomorrow, comment picks for me to 0DTE yolo. My life is fucked either way. IRS is gonna rape me. submitted by /u/Useless-Ulysses [link] [comments]
Honestly thought it was gonna start coming back down and didn’t sell when it was up $4900. now im back down to $200 submitted by /u/KGthroatpunch [link] [comments]
Today I Learned (TIL) You learn something new every day; what did you learn today? Submit interesting and specific facts about something that you just found out here.
Reddit Science This community is a place to share and discuss new scientific research. Read about the latest advances in astronomy, biology, medicine, physics, social science, and more. Find and submit new publications and popular science coverage of current research.