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Seeking Wisdom From Darwin To Munger (The Psychology behind behavior…
Seeking Wisdom From Darwin To Munger
The Psychology behind behavior
Expectations
What we think happens (consequences) reinforce a certain behavior.
Our experiences influence us in the future.
We base what is likely to happen on what we see, not on what we don't.
"Today 14 million people didn't win the lottery"
Predictions
Behavior
that seems
irrational
, may be fully
logical
from the
individual's point of view
, there is always some background within the human behavior.
"Everything seems stupid when it fails."; "You can only predict things that have happened."
Associations
Just because you associate some stimulus with earlier pain/pleasure it doesn't mean it will repeat.
People
can
influence
us by
associating
their VP
with
something
you like
. We buy because we associate with positive things. (understand the experiences that sell to your TA)
Past Experiences
We become overly optimistic/pessimistic
after
success/failure.
Good/Bad consequences aren't always associated with good/bad decisions.
Do not blindly trust past experience
(do not use it as a guide into the future),
always find the reason for the specific consequence.
"Chance has no memory."
The probability of any single event isn't change by its frequency.
Reality Distortion
It is not uncommon to deny/distort reality to feel more comfortable/safe.
"We view the things we want to see...";
"What the human being is best at doing is interpreting all new information so that it serves your prior conclusion".
Commitment
"If you find yourself in a hole, stop digging";
You don't have to make up for what you have lost, that will push you into irrational behavior.
The more invested we are in something, the harder it is to quit it.
We protect ourselves by refusing to admit the wrongdoings we have done.
Envy
Envy is one of the
fundamental causes of human suffering.
IF you achieve your goals does it matter if someone else does better?
"The best way to avoid envy is to deserve the success you get"
Comparison
We judge stimuli by comparison to a reference point.
"How we value things depend on how you compare them."
Influencing
We are
easily influenced by stories.
And even more easily by stories with emotion we can
relate
to.
Vivid description is more influential that statistics.
Mirroring
We respond the same way as we are treated.
Your behavior
towards others should r
eflect the behavior you want to receive from them
.
Confucius: "What you don't want yourself, don't do to others."
Appreciation
A
favor/gift
is most effective when it is personal, significant, unexpected. That's why you should always strive for
exceeding the expectation of people.
Appreciate your enemies, for they tell you your faults.
"Our enemies' opinion of us comes close to the truth than our own."
Authority
It
is so powerful
that we may cause pain to other people to comply with it.
Social Proof
"When people are free to do as they please, they usually imitate each other."
, it is in our nature, we are social animals
we believe and act as one.
Social Proof
is at its
strongest
when a certain event is
urgent
. Time restraints create a sense of that, which lead to uncertainty, which leads to higher levels of social proof.
The more people
there are,
the less personal responsibility
we feel = safety = easier to make decisions.
"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are correct."
Reasoning
"Our need for making sense makes us even believe in nonsense"
We are more likely to comply
to a favor if we are presented with a
reasoning
, even if we don't understand it or it is wrong. The word "
because" is all that it matters.
Using "why" and "how" helps us learn.
Ideas we don't comprehend do not motivate us to improve.
Understanding is about the ability of seeing patterns.
Reason and patterns aren't seen everywhere.
Actively searching for patterns in a game of chance will only yield false sense of value.
Discipline and Activenes
s
"It is not enough to be busy; so are ants."
The right question is a situation like that is: "
What are we busy about?" -
There is no reason to do a good job with something you shouldn't do in the first place.
It takes discipline to avoid doing any damn thing just because you can't stand inactivity.
"There's no use running if you are on the wrong path."
Silence
"If you have nothing to say, say nothing".
It is not always needed to present an answer, sometimes
"I do not know"
is more valuable.
Emotions
Emotion
is the single
worst enemy of rational decision making
, he who
controls
his
temper
,
controls
his
life
.
Make sure that
after an emotional event
you take a so called
"cool-off" period
so your decision aren't being affected.
Stress
Stress is neither good nor bad, it depends on our attitudes towards it.
The reasoning is that
we need challenges to develop.
To
achieve
a state of inner tranquility and
outer effectiveness
you should understand the principle of
assessing which events can
be
and
which
cannot be controlled by us.
If a
certain event
is
out of our controlled reach
, we can't do anything about it -
no point in worrying
; if something can be
controlled by us
-
correct it
, then you won't have to worry about that either.
"Complete freedom from stress is death"
Questions
The
answers
we get
depend
on the
questions
we ask. The way a though is presented dictate they effects from it.
"There are no foolish question and no man becomes a fool until he has stopped asking questions."
Publicity and Anonymit
y
People change their behavior based on the social circle that surrounds them.
Being in the center of
public attention stresses
,
anonymity empowers
for better or worse.
Consequences
Every action has multiple consequences
and opportunity costs and they often are different than the expected ones.
When
optimizing
look at the
whole system
and not individual parts, as that will eliminate any unwanted changes.
Multitasking
Multitasking
is naturally
impossible
for our brains. Shifting our mental attention between tasks
costs us in time and efficiency.
"To do two things at once is to do neither."
Goals
Our plans miscarry because they have no aim.
"When a man does not know what harbor he is heading for, no wind is the right wind."
Be concrete while setting your goals. Be focused on results. Be logical and realistic. Make your goals measurable and give yourself a strong "Why".
What cause your goals to materialize?
What are the key factors that need to be achieved so my goals become reality?
Try i
nverting your goal.
What causes the opposite of my goal, how can I avoid that?
Be happy while you are living, for you are a long time dead.
You live as if you were destined to live forever, no though of your frailty ever enters your head, of how much time has already gone by you take no heed."
"Thus we never actually live, but hope to live, and since we are always planning how to be happy, it is inevitable that we should never be so."
It is not that we have so little time but that we waste much of it
The Psychology of business
Understanding the sales thoughts of your prospect will help you tremendously.
- Find the underlining reasons for their behavior, if it is a though-out decision it won't be emotional
Small changes make all the difference.
When making any kind of decision
calculate it's long term effects
without regarding how insignificant it may seem now.
The economics of scale has limits.
The bigger you get, the less your costs lower and the more your systems become inefficient.
The 80/20 Rule.
It is not needed to do extraordinary things, to get extraordinary results.
A few things can generate most of the value.
Understand the causes of your results.
It is hard to achieve something if you do not understand the underlying causes of it.
What are the key factors that determine a result?
For understanding the underlying causes we need to compare the positive with negative outcomes and find the difference in factors.
There is nothing more deceptive than an obvious fact.
In life most of the things that seem obvious get neglected.
"Look where the bullet holes are and put extra armor everywhere else."
- If the plane has managed to come back with bullet holes, the places hit aren't important.
You can reach a conclusion about the success of any given situation only by evaluating both it's good and bad side.
What does numbers actually mean?
Does their magnitude make sense and how does it compare to previous results?
Which are the valuable results?
"Not everything that counts can be counted, and not everything that can be counted counts"
Change isn't a singular event, it has dozens of layers all connected to it.
Consider the change in conditions before using past evidence to predict the future.
Learn by your past experience.
"Those who cannot remember the past are condemned to repeat it"
By studying errors you prime yourself for the future.
To reduce mistakes you should study failures with severe consequences.
Use words, explanations and analogies that your audience understand.
"If you can't explain it simply, you don't understand it well enough."
In any given situation there are only a few decisions of real importance, we should learn to prioritize and focus.
To avoid drowning in low valued information set your most KPI's beforehand.
"
There are in fact two things: science and opinion; the former begets knowledge, the latter ignorance."
Engage in self-criticism.
-
Assume you are wrong at first and then build your argumentation on that.
"A lot of success in business comes from knowing what you really want to avoid - if I knew where I would die, I would never go there"
Begin with the end in mind.
Let us
start
with what is
being seeked
and
assume
that we already
found it
.
If that proves to have a strong purpose -
go for it.
Calculate the risks of being right and wrong.
-
What is there to gain from your correct judgment in this situation and what is at stakes?
Act with integrity and individuality.
"The content of your character is your choice. Day by day, what you chose, what you think, and what you do is who you become. Your integrity is your destiny...it is the light that guides your way."
"Respond intelligently even to unintelligent treatment."
-
Be nice to people and if they do not reciprocate, then just ignore them.
Create margins of safety.
-
If you are looking to pass a bridge with a vehicle that weighs 10 pounds, the bridge should sustain at least 15 000 pounds.