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📈🧠 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.
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!
Can we rally on SMCI please?! lol it keeps going down down down and I want it to stop. Should I be worried orrr? submitted by /u/Tjeckster [link] [comments]
11/15 55C MSTX MSTX is leveraged MSTR. Calls are leveraged stocks (I think, idk what a call is actually). Combined, it means a one way ticket to lambo land. LITERALLY what's the worst that could happen on a one way ride to lambo land??? All signs are pointing to the bull run. ALL SIGNS. This is the single greatest indicator of a bull run we've ever had. It may be the last chance someone has to get out of gen z poverty. To recap: Voldemort wins MSTR moons MSTX giga moons you are here MSTX calls create generational wealth for it's holders. THE FIRE RISES submitted by /u/WhoreMasterFalco [link] [comments]
Viasat stock is down 65% YTD. Has a 15% short float. Trading at the price not seen since 2003. So beaten and bruised, it might be a speculative play that yields big. How do you get internet wifi on a plane in the middle of the atlantic ocean, or pacific or at airport runway or over des moines, iowa? That's viasat. They operate on american, delta, united, emirates, jpn, and about 30 other major airlines. How do military get satellite internet in the middle of syria or some shithole somewhere? They don’t just tap abu’s wifi, they use viasat. This is a geostationary(GEO) satellite company that services commercial airlines, and government contracts. Bad news: Starlink is the direct competition. Viasat acquired Inmarsat(European satellite fleet) in 2023 which cost billions. While Viasat’s revenues grew post-acquisition, increased costs and technical setbacks mean it currently lags in profitability compared to starlink. The viasat 3 constellation is 3 satellites the covers the Americas, Europe, and Asia, for full global coverage of satellite internet. The europe and asia satellites are set to launch in 2025 based on last earnings call. Inmarsat recently successfully launched 2 satellites over the arctic for government/military customers. Despite current losses, the Inmarsat acquisition provides considerable upside. Viasat is now positioned as one of the most comprehensive global providers of high-speed satellite connectivity, competing against starlink, However, Viasat has a unique advantage: its satellite network spans multiple orbits, including geostationary and low-Earth orbit satellites, which cater to both commercial and government needs. Earnings wednesday after market close. Im expecting good updates related to viasat 3 and inmarsats satellites and positive earnings. Tied in with high short float and complete stock decline the whole year yields to me a good degenerate earnings gamble for playing the opposite of what you should do(puts). $10c for 11/15. submitted by /u/Gskinny [link] [comments]
Clever selling and timing by the ceo of NVDA and the Citadel group to off load in front of the curse of the Dow "Over the past ten years, stocks that have been added to the Dow lost an average of 20% in the first year after inclusion. Some have done considerably worse." It's a phenomenon known as the " Curse of the Dow " https://www.kiplinger.com/article/investing/t038-c008-s001-the-curse-of-the-dow.html submitted by /u/Salt_Yak_3866 [link] [comments]
The strategy rn is to go big on calls and hopefully get some contracts for free if I see a gain by selling out my original position. Hoping it works out. submitted by /u/Jetskkiii [link] [comments]
The US equities market are about to experience a powerful surge in the coming weeks as the participants gets clarity on: 1) US election results (Nov 5): Kamala and Trump have very different ideas on managing economy, international trade , and foreign policy. The market is sitting on the fence (not commiting any more cash and rightly so) till the election results are out and investors know how a sector is likely to perform in next 12-24 months. 2) At least 25 basis rate cut by US Fed (Nov 7): CPI report last week was benign enough to free US Fed for another rate cut of 25 basis points. US middle class, small businesses, and even investors are reeling under high interest rates. And another rate cut will bolster their confidence to invest and bring borrowing costs lower to spur consumption. 3) Nvidia earnings (Nov 20): Nvidia has been the bulwark of AI sector. Most fabulous amongst the fabulous 7. Its earnings results are likely to give another confirmation of high demand of AI chips (which will lead to higher productivity and efficency) and provide a strong boost Nasdaq returns by the end of the year. How to trade: Buy Nvda Calls at strike price of 145$ with 4 weeks expiry. Buy SMH ETF Calls at strike price of 255$ with 4 weeks expiry. Buy VOO ETF Calls at strike price of 545$ with 4 weeks expiry. submitted by /u/Option_Closeout [link] [comments]
Praise the lord regards as he shall return and stick it to you in the ass with your own short dated options. One of the most underrated yet important aspects of leading a company is them vision. Good for us there’s one man who has just dat and his name is Peter J Beck. He wants his company to become a multi generational one and has paved the way for it to happen. The following are the way and the next catalysts : Winning a big contract, long overdue it’s been 6+ months without anything relevant Seing a “hop” of Neutron booster meaning the booster going up and back down without exploding Seing full Neutron vertical on them pad Announcement of what the mega constellation will be This last point alone is a potential multi bagger. The space economy is a violent one and destroys cash and balance sheets at a rapid gaylocity. The only way to be FCF positive on the long run is not to launch, it’s to have a paying service ! A mega constellation selling subscriptions for the greatest number. A lot of companies can build a mega constellation, not many can build one AND send it to its target orbit : Only SpaceX has achieved this prowess. Blue Origin seems to be on its way ever since daddy Bezos left Amazon to 100% focus. $RKLB is the next one to do just dat. Peter J Beck is a gem, brilliant passionate yet humble and focused engineer while you’re a regard who can barely read, who should you trust your money with ? Gay power to all of you. PT by end 2025 : $20 Full position : 200x $12 Jan 2027 call options avg $2.6 submitted by /u/PresentationReady873 [link] [comments]
submitted by /u/scientificamerican [link] [comments]
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