📈🧠 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.
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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!
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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!
Not only can't they land. They can't take off! https://www.google.com/amp/s/www.dailymail.co.uk/news/article-13399453/amp/Boeing-737-passenger-jet-carrying-73-skids-runway-Senegal-latest-disaster-plane-maker-day-FedEx-767-landed-without-nose-gear-Turkey.html submitted by /u/Ryukazu_in2deep [link] [comments]
The Sahm rule signals the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to the prior 12 month low. The Sahm rule stands at 0.37% today and has been in an uptrend since January. Once we breach 0.5% it indicates the economy is actively in recession. Not there yet but inching closer each month. Keep an eye on unemployment. If it starts accelerating upward then the economy is in for a rough time. submitted by /u/ValenTom [link] [comments]
***This is not an inverse post. This is a crack-pot estimate that cannot factor in geo-political or economic changes in the future. Use at your own discretion*** --- **Skip To End Game if You're Only Trying to Play Earnings*\* -- May 9-10th: the boring drop Due to ARM's shite guidance, NVDA as well as the rest of the semi-conductors are going to have a cool day tomorrow barring a sizeable increase in jobless claims (more jobless claims = economy doing crap, thus the Fed is more likely to cut interest rates, which Wall Street glazes themselves over). The reason? BS articles like this are being spread by the news that misattributes ARM's increase in pricing to the AI boom (of which it has no relation): https://www.investing.com/news/stock-market-news/tsmc-morgan-stanley-hikes-pt-on-arm-ai-cpu-boost-3426842 Normies eat this shit up and if SPY ain't peaking in the morning we're going to see a decrease or flat market at best bleeding into Friday. Call/Put skew further shows that traders are consolidating at $900 into the pre-pre-earnings week: https://preview.redd.it/3wfjhk9dbazc1.png?width=1444&format=png&auto=webp&s=d4fa3ea1fa1878a5ee298e5b16d03b5a6a80a9d1 https://marketchameleon.com/Overview/NVDA/VolatilitySkew/ The gist of this is that if we have really good news, NVDA could hit $920 but with poor market news could hit a bottom of $875 by this Friday. With VIX (a measure of market volatility, which measures fear) being below 16 and hovering around 13, Market Makers are likely to feed into trends and buy dips so this is bullish in the market overall. May 13-17th: the slight recovery then deep decline Heading into next week we are likely to see a recovery in price from the dip this week followed by a decline preceding earnings the following week. Why? Hedging. Wall Street as well as some retail investors are aware that the previous guidances issues were made under completely different macroeconomic expectations. Previously we were under the assumption that 3 rate cuts were coming whilst now only 1 possibly? The result is a drop in price akin to the previous earnings cycle but worse, given the poor earnings we've seen from fellow semiconductor manufacturers. The previous earnings cycle was actually positive across the board and what did we see? https://preview.redd.it/u3j7wvaqdazc1.png?width=717&format=png&auto=webp&s=01f638b22d3b0eb198b7d9237993892b15121bd0 Roughly a $75 decline in share price during the week preceding earnings. And this was off of good news in the market. We could see the price hit sub-800 if everyone cashes out all at once in this week, if previous market behavior is anything to go off of. Depending on CPI on Wednesday and Jobless Claims on Thursday this could be mediated but we shall see. The likely range is 845-895 based on previous volatility around earnings. May 20-22nd: Earnings END-GAME Nvidia will most likely continue it's drop from the previous week but this isn't a problem for us. Why? Because we know NVDA is the shit. I mean it truly is in another league of it's own. It quite literally is the industry standard that only those on the know are aware of. Their platform is what pretty much everyone who trains AI is using and will continue to use due to how optimized it is. We're talking about the comparison of an iPhone in 2008 to a flimsy flip phone. It's just so much more advanced that they are crushing the competition. This is why regardless of AMD, INTC, SMCI, all of their failures, NVDA will absolutely crush EPS, Revenue, and Guidance. https://www.nbcnews.com/business/business-news/what-is-nvidia-what-do-they-make-ai-artificial-intelligence-rcna140171 They are the backbone of all AI training models right now and as it stands, no one is even close to touching them. Thus they will destroy expectations and rebound to even higher highs than Wall Street has expectations for due to their monopoly-like control of the industry. Barring a world war or FTC intervention, there is no way this stock can go down. submitted by /u/rayrayrex [link] [comments]
$.30 EPS expected --- $.57 Reported 165.02 Million Rev Expected --- 167.55 Million Reported Now expects revenue this year of $726.5 million to $735.5 million up from its previous forecast of as much as $729.5 million and above an expected $728 million. Am I missing something or is this a good time to load up on some calls in the open tomorrow if this price stays? submitted by /u/Geocacher123 [link] [comments]
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