The Psychology of Human Misjudgment is the magnum opus on why we behave as we

do. Below is the fully revised talk.

 

Background

 

In the run-up to publishing Poor Charlies Almanack, Charlie Munger remarked that

“The Psychology of Human Misjudgment” could use “a little revising” to align

with his most current views on the subject.

 

Charlie’s “little” revision would amount to a full-scale rewrite, with loads of

new material and a “stop-the-press” completion schedule. The talk features

Charlie’s original concept of “behavioral finance,” which has now burgeoned into

its own academic field of study.

 

Charlie also addresses the importance of recognizing patterns to determine how

humans behave, both rationally and irrationally. He shares with us his checklist

of twenty-five standard causes of human misjudgment, which contains observations

that are ingenious, counterintuitive, and important—values Charlie treasures in

the work of other great thinkers throughout history. He also emphasizes the

“lollapalooza” power of psychological misjudgments in combination.

 

This talk was written for Poor Charlie’s Almanack and is published on fs.blog

with written permission from Peter Kaufman and Charlie Munger. Munger was one of

my heroes, and my conversations with him inspired The Great Mental Models series

and Clear Thinking.