Charlie Munger: The Psychology of Human Misjudgment [Outliers]

The Knowledge Project

Shane Parrish

Business, Society & Culture, Technology, Education, Self-improvement, Investing, Entrepreneurship

4.7 • 2.9K Ratings

🗓️ 18 November 2025

⏱️ 73 minutes

🔗️ Recording | iTunes | RSS

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Summary

Charlie Munger spent his life studying one question: why do smart people make bad decisions? In his legendary talk The Psychology of Human Misjudgement, Munger outlined 25 psychological tendencies that quietly distort how we think. From incentives and social proof to denial, envy, and authority bias, you’ll learn how these hidden tendencies shape behavior and how to build the mental defenses that helped Munger create one of the best decision records in history. You’ll hear practical examples, powerful antidotes, and lessons you can apply to business, investing, and everyday life. ----- Chapters: (00:00) Introduction: (01:38) Pattern #1: Reward and Punishment Superresponse Tendency (05:00) Pattern #2: Liking/Loving Tendency (08:38) Pattern #3: Disliking/Hating Tendency (11:48) Pattern #4: Doubt-Avoidance Tendency (14:19) Pattern #5: Inconsistency-Avoidance Tendency (20:08) Pattern #6: Curiosity Tendency (21:30) Pattern #7: Kantian Fairness Tendency (23:32) Pattern #8: Envy/Jealousy Tendency (27:32) Pattern #9: Reciprocation Tendency (31:52) Pattern #10: Influence-from-Mere-Association Tendency (35:43) Pattern #11: Simple, Pain-Avoiding Psychological Denial (37:53) Pattern #12: Excessive Self-Regard Tendency (41:06) Pattern #13: Overoptimism Tendency (42:11) Pattern #14: Deprival-Superreaction Tendency (45:28) Pattern #15: Social-Proof Tendency (48:56) Pattern #16: Contrast-Misreaction Tendency (51:33) Pattern #17: Stress-Influence Tendency (54:20) Pattern #18: Availability-Misweighing Tendency (54:54) Pattern #19: Use-It-or-Lose-It Tendency (56:26) Pattern #20: Drug-Misinfluence Tendency (57:23) Pattern #21: Senescence-Misinfluence Tendency (58:42) Pattern #22: Authority-Misinfluence Tendency (01:01:58) Pattern #23: Twaddle Tendency (01:04:18) Pattern #24: Reason-Respecting Tendency (01:06:42) Pattern #25: Lollapalooza Tendency (01:10:28) Epilogue ----- I published the full updated version on fs.blog with his permission, we are the only website to my knowledge that had his personal permission to post it. ----- Upgrade: Get hand-edited transcripts and an ad-free experience, and so much more. Learn more @ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Newsletter: The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. See what you're missing: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠fs.blog/newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ------ Follow Shane Parrish X ⁠⁠⁠⁠⁠@ShaneAParrish⁠⁠⁠⁠⁠ Insta ⁠@farnamstreet⁠ LinkedIn ⁠Shane Parrish ------ This episode is for informational purposes only. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	I came to the psychology of human misjudgment almost against my will. I rejected it until I realized
0:06.0	that my attitude was costing me a lot of money and reduced my ability to help everything I loved.
0:11.4	That's a quote by Charlie Munger, and that's what we're going to talk about today, this psychology of
0:16.1	human misjudgment. Welcome to the Knowledge Project.
0:21.6	I'm your host, Shane Parrish.
0:23.5	This podcast is all about learning from others, mastering the best of what they figured out
0:28.5	so you can use their lessons in your life.
0:33.8	Charlie Munger was a lawyer from Omaha who taught himself psychology because Harvard Law School refused to.
0:39.8	Munger was the partner of Warren Buffett, and together they created one of the best track records the world has ever seen, and they used psychology to do it.
0:48.9	In 1995, Munger formalized what he'd learned into a speech at Harvard.
0:53.6	He called it the psychology of human
0:55.4	misjudgment. And in it, he identified 24 psychological tendencies that caused systematic errors in
1:02.1	thinking. Ten years later, at age 81, he rewrote it from memory, expanding it to 25 tendencies.
1:09.4	I published the full updated version on FS.blog with his personal
1:13.8	permission. We're the only website to my knowledge that has this permission to post it. I'll put the
1:18.7	link in the description. The psychology of human misjudgment is one of the most valuable
1:24.3	frameworks for understanding human behavior ever created. It's Munger's
1:29.0	map of how your brain systematically fools you and how to fight back. Let's dive in.
1:37.6	Pattern one, reward and punishment super response tendency. Munger opened his talk with what he felt is one of the most important and underrated patterns,
1:48.8	what he called reward and punishment super response tendency, otherwise known as just incentives
1:55.2	and disincentives. Munger starts by saying,
1:58.0	Well, I think I've been in the top 5% of my age cohort all my life
	...

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