25 Cognitive Biases and The best Modern Application
25 Cognitive Biases - Bias 1 Reward-Punishment Super-Response Tendency
Bias 1 – Reward and Punishment Super-Response Tendency

The power that incentives and disincentives have on the actions of others cannot be overstated. Munger says this should be obvious but so many people don’t understand the how important incentives are for shaping people’s motivation to complete a task. Incentives [...]

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25 Cognitive Biases - Bias 2 Liking-Loving Tendency
Bias 2 – Liking/Loving Tendency

We ignore the faults of other people, products or companies that we admire. According to Charlie Munger, a newly arrived human is born to like and love, and the strongest inborn tendency to love is that of a mother for its [...]

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25 Cognitive Biases - Bias 3 Disliking-Hating Tendency
Bias 3 – Disliking/Hating Tendency

We also ignore the virtues of those things we dislike and distort the facts to facilitate that hatred while putting on blinders to other options and opinions. Disliking/Hating Tendency happens from the time the newly arrived human is also born to [...]

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25 Cognitive Biases - Bias 4 Doubt-Avoidance Tendency
Bias 4 – Doubt-Avoidance Tendency

If we are unsure about a decision we try to quickly remove any doubt by making an ill-informed, quick decision, this is doubt-avoidance tendency Doubt-avoidance tendency is triggered by some combination of puzzlement and stress. [...]

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25 Cognitive Biases - Bias 5 Inconsistency-Avoidance Tendency
Bias 5 – Inconsistency-Avoidance Tendency

We have a reluctance to change. Eliminating bad habits is a rare trait. The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance. Factors that create an anti-change and Inconsistency Avoidance Tendency [...]

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25 Cognitive Biases - Bias 6 Curiosity Tendency
Bias 6 – Curiosity Tendency

There is not enough curiosity to learn, even though you receive so many benefits from a continuous learning process. Munger says, “the curious are also provided with much fun and wisdom once formal education has ended.” Curiosity tendency has been one [...]

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25 Cognitive Biases - Bias 7 Kantian Fairness Tendency
Bias 7 – Kantian Fairness Tendency

Life isn’t fair, but many can’t accept this. Tolerating a little unfairness should be okay if it means a greater fairness for all. The example Munger uses is letting in other drivers on the freeway knowing they will reciprocate in the [...]

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25 Cognitive Biases - Bias 8 Envy-Jealousy Tendency
Bias 8 – Envy/Jealousy Tendency

Self-explanatory, but Munger makes an interesting point that envy/jealously tendency is surprisingly absent from most Psychology textbooks. Envy/jealously tendency comes from the need to get often-scarce food, this occurs often when the food is seen in possesion of another member of [...]

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25 Cognitive Biases - Bias 9 Reciprocation Tendency
Bias 9 – Reciprocation Tendency

In reciprocation tendency, we tend to want to return the favor when someone helps us, which can be a good thing at times, but it can also lead to poor decisions if you reciprocate business deals based on these minor favors. [...]

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25 Cognitive Biases - Bias10 Influence-From-Mere-Association Tendency
Bias 10 – Influence-From-Mere-Association Tendency

We can be easily manipulated by mere association. It can be a group of people, the quality of a product, advertising, etc. [...]

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25 Cognitive Biases - Bias11 Simple Pain-Avoiding Psychological Denial
Bias 11 – Simple, Pain-Avoiding Psychological Denial

We have a habit of distorting the facts until they become bearable for our own views. [...]

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25 Cognitive Biases - Bias 12 Excesive Self-Regard Tendency
Bias 12 – Excessive Self-Regard Tendency

We all think we’re above average. This is where overconfidence comes from. Munger says the greatest type of pride should be taking pride in being trustworthy to avoid developing an ego. This is the sickness of dictators… [...]

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25 Cognitive Biases - Bias13 Over-Optimism Tendency
Bias 13 – Over-Optimism Tendency

Over-optimism bias usually shows that excess of optimism is the normal human condition [...]

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25 Cognitive Biases - Bias 14 Deprival Super-Reaction Tendency
Bias 14 – Deprival-Superreaction Tendency

Deprival-Superreaction in a way is loss aversion. Loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains. Most studies suggest that losses are twice as powerful, psychologically, as gains. A man ordinarily reacts with irrational intensity to [...]

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25 Cognitive Biases - Bias 15 Social-Proof Tendency
Bias 15 – Social-Proof Tendency

Social-Proof Tendency is an automatic tendency to think and act as others around think and act [...]

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25 Cognitive Biases - Bias 16 Contrast-Misreaction Tendency
Bias 16 – Contrast-Misreaction Tendency

25 Cognitive Biases – Bias 16 Contrast-Misreaction Tendency Our problem here is a misunderstanding of comparisons and missing out on the magnitude of decisions, it is better to evaluate people and objects by themselves and not by their contrast. An example [...]

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25 Cognitive Biases - Bias 17 Stress-Influence Tendency
Bias 17 – Stress-Influence Tendency

Adrenaline tends to produce faster and more extreme reactions. Some stress can improve performance but heavy stress often leads to dysfunction. [...]

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25 Cognitive Biases - Bias 18 Availability-Misweighting Tendency
Bias 18 – Availability-Misweighing Tendency

We overweight what’s easily available. A checklist or set of rules can help with this tendency. Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it. And the brain can’t use what it can’t remember or what [...]

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