Seeking Wisdom: From Darwin To Munger

“Our life is what our thoughts make it.“ – Marcus Aurelius Antoninus

The first step to understanding our behavior is identifying the factors influencing it. Our brain, anatomy, physiology, and biochemistry are the foundation for our behavior as they limit our thinking. Since our brain’s parts work closely with our body’s anatomy, physiology, and biochemistry, they must be viewed together as one. There are several factors shaping our behavior. One of which is evolutionary changes. 

Genetic mutations (resulting from DNA copying errors in sequence molecules) and natural selection are two major mechanisms responsible for how our brain evolved. They shape our behavior to increase the chances of survival and reproduction. 

There is two driving force that drives our behavior for survival and reproduction; pain and pleasure. As humans, we tend to avoid anything that would harm us and seek those that would bring us pleasure or rewards. 

Aside from evolutionary changes, other factors that affect our thinking and behavior are our life experiences, state of mind, tendency to fear, cognitive biases, and cultural setting.

“Why, oh why are human beings so hard to teach but so easy to deceive.” – Dio Chrysostom

The more emotional, confused, uncertain, insecure, excited, distracted, tired, or stressed we are, the easier we make mistakes. Geniuses aren't excluded.

Mere association

We are easily influenced by people, products, services, events, or situations associated with pleasure or positive things. That's why advertisers and politicians connect what we want to sell the things they like and avoid associating themselves with negative events.

Reward and punishment

We do what is rewarding and avoid what we are punished for. We learn from the consequences of our actions. Whatever causes us to repeat a certain behavior is reinforcing, while those that make us stop are punishing.

Self-interest and incentives

People act in their best interest and are influenced by incentives. We stand a better chance of changing people if we appeal to their fear of losing something valuable—job, reputation, position, money, control, etc. This is because the risk of loss is more motivating than the chance of gaining. 

Self-serving tendencies and optimism

We see ourselves as unique and special and have optimistic views of ourselves and our family. We overestimate the degree of control we have over events and underestimate chance. Optimism is good, but realism is better when it comes to important decisions.

Self-deception and denial

We believe something is true because it sounds believable, or we want to believe it, especially with issues of love, health, religion, and death. This is one reason why people follow gurus. They encourage followers to trust their hearts and forget their heads.

Consistency

We want to remain consistent when we’ve already made a commitment. We want to feel that we've made the right decision. And the more we have invested in our behavior, the harder it is to change.

Deprival syndrome

When something we like is (or threatens to be) taken away, we value it more. That’s why we easily get upset when our freedom, status, reputation, money, or anything we value is taken away. The more we like what is taken away or, the larger the commitment we've made, the more upset we become. This can create hatred, revolts, violence, and retaliation.

Status quo and do-nothing syndrome

We prefer to keep things the way they are. We resist change and prefer effort minimization. We favor routine behavior over innovative behavior. The more emotional a decision is, the more choices we have, and the more we prefer the status quo. This is why we stick with our old jobs, brands of cars, etc. Even in cases where the costs of switching are meager.

Impatience

We value or present more than the future. We seek pleasure today at the expense of what might be better tomorrow. We prefer an immediate reward to a delayed but maybe larger reward. We spend today what we should save for tomorrow. This means that we may pay a high price in the future for a small immediate reward. 

Envy and jealousy

We evaluate our situation by comparing what we have with others. How happy we are is partly determined by where we stand in relation to similar others.

Contrast comparison

We judge stimuli by differences and changes and not absolute magnitudes. Temperature, loudness, brightness, health, status, and prices are all evaluated based on their contrast or difference from a reference point. This reference point changes with new experiences and context, meaning how we value things depends on what we compare them with.

Anchoring

We are over-influenced by certain information acting as a reference "anchor" for future judgments.

Vividness and recency

The more dramatic, salient, personal, entertaining, or emotional some information, event, or experience is, the more influenced we are. For example, the easier it is to imagine an event, the more likely we will think it will happen. We are easily influenced when we are told stories because we relate to stories better than to logic or fact.

Omission and abstract blindness

We react to stimuli that we encounter or that grab our attention. Concrete and precise things elicit stronger reactions than abstract ones. Personal experience trumps vicarious. We focus on available information rather than on the missing ones.

Reciprocation

We tend to repay what others have done for us, either good or bad. Whenever someone does something for us, we want to do something back. That’s why companies use free trials and send out free samples. A gift with our name on it is hard not to reciprocate.

Liking and social acceptance

We want to be liked and accepted. We believe, trust and agree with people we know and like. We do things for people we like. We like the people who like us (because we like to be liked.) And if we feel that a person likes us, we tend to like them back.

Social proof

We are social animals, influenced by what we see others doing and believing. We believe that others know more than we do. We want what others want because we assume there must be a reason why they want it. We avoid what others avoid. We imitate without thinking.

Authority

We tend to obey authority, especially when uncertain, supervised, or when people around us are doing the same. Credible authorities most easily influence us, those we see as both knowledgeable and trustworthy.

Sensemaking

We don't like uncertainty. We need to understand and make sense of events. We refuse to accept the unknown. We, therefore, seek explanations for why things happen, especially if they are novel, puzzling, or frightening. By identifying patterns and causes, we gain comfort and knowledge for the future.

Reason-respecting

Our need to make sense makes us even believe in nonsense. When people ask us for a favor, we are more likely to comply if they give us a reason, even if it's not understandable or wrong. Often it isn't the reason itself that is important, but how the reason is phrased. 

Believe first and doubt later

We believe people when they give us reasons. We believe that people are telling us the truth, even when they are not. We are not natural skeptics. We find it easy to believe but difficult to doubt. Doubting is active and takes effort.

Memory limitations

Our memory is selective. We remember certain things and distort or forget others. Every time we recall an event, we reconstruct our memories. We only remember fragments of our real past experiences. Dramatic or fearful experiences or events stick in our memories. Emotional events are better remembered than unemotional ones. That is why we learn better if the information is tied to a vivid story.

Do-something syndrome

We sometimes act because we can't sit still. We feel bored, impatient, threatened, pressured, or simply desire excitement and stimulation. We act without a sensible reason. It seems easier to explain doing something than actively doing nothing.

Say-something syndrome

People tend to speak even if they have nothing to contribute. Why do we always need to answer? Isn't it better to say, "I don't know?" The Greek philosopher Socrates said that awareness of ignorance is the beginning of wisdom.

Emotions

Emotions come before reason. Often when we make a decision, our feelings take over. We hear the bad news first. Under the influence of intense emotions, we sometimes make hasty judgments and choices we would normally never do.

Stress

Too much information, lack of predictability or control, too many choices, lack of sleep, social isolation, job status, crisis, catastrophes, fear, etc., cause stress. The less control we perceive we have over our lives, the easier we fall victim to stress. The more stress we experience, the more we tend to make short-term decisions.

Pain, chemicals, and diseases

We become confused when we are in pain, under the influence of chemicals, or have a physical or mental illness. Physical and mental pain may cause fear, anger, and stress. Chemical changes magnify the pain and can cause depression. Drugs, stimulants (like nicotine, alcohol, or coffee), and depressants distort our senses.

Contextual influences

Our behavior is influenced by social situational factors, conditions and circumstances, the structure or description of a problem or choice, and our desires, mood, and expectations.

"There will come a time when mathematical ignorance, like public smoking, will become socially unacceptable." – Jerry King

System thinking

Our actions all have consequences. Regardless of how carefully we plan, we can't anticipate everything. Even if we have good intentions, we can't eliminate bad consequences. This is because outcomes don't follow intentions from intentions, and intentions by definition apply only to intended consequences. Good thinking is better than good intentions.

The whole system

A system is a collection of parts working together as a whole, and it adjusts in response to feedback. Positive feedback amplifies an effect, while a negative dampens it. Other variables may change when we alter a factor in a system. Trace out the short and long-term consequences in numbers and effects of a proposed action to see if the net result agrees with our ultimate goal.

Predictions

The world is too complicated to predict all the effects of some action. Maybe a business can predict scenarios like reduction in demand and intensified competition, but some events, their timing, magnitude, or consequence, are impossible to anticipate. The more parts involved and the more they interact, the more can happen, and the harder it is to determine the consequences of individual actions.

Scale and limits

Changes in size or time influence form, function, and behavior. If something of a certain size is made bigger or smaller, it may not work the same way. Some things get better, and others get worse. For example, changes in the size of an organism affect its strength, surface area, complexity, metabolism, longevity, and speed of movement.

Breakpoints, critical thresholds, and limits

At a certain scale, a system reaches a critical mass or a limit where the behavior may change dramatically. It may work better, worse, cease to work, or change properties. Small interactions over time slowly accumulate into a critical state - where the degree of instability increases. A small event may then trigger a dramatic change like an earthquake.

Size and frequency

Statistics show that the frequency of some events and attributes are inversely proportional to their size. Big or small things can happen, but the bigger or more extreme they get, the less frequent they are. For example, there are a few large earthquakes, fires, avalanches, or cities, but many small ones. There are a few billionaires but many millionaires.

Constraints

Optimization of one variable may cause the whole system to work less efficiently. The performance of its weakest link constrains the performance of most systems. A variable that limits the system from achieving its goal or optimum performance.

Causes

It's hard to achieve a result if we don't understand what causes the result to happen. To solve problems or achieve goals, we must first understand what causes the result we want to accomplish. Start with examining what factors make up the system and how they connect. Then, define the key factors that determine the outcome.

Large effects

We believe that cause resembles its effect - for example, large or important effects must have large causes, or complicated outcomes have complicated underlying reasons.

Random events

We try to find causal explanations or something to blame when bad things happen. The more unexpected or negative we find an event, the more likely we are to look for explanations. We underestimate the influence of randomness.

Acting on symptoms

Sometimes we mistake an effect for its cause. Many times when we have many problems, there may be one common reason for them all.

Multiple causes

We attribute an outcome to a single cause when there are multiple causes. We assume that A causes B but A may not be the only thing that causes B. There may be many causes for a given effect.

Mistaking correlation for cause

Correlation means a relationship or association between two or more variables. We tend to assume that when two things happen together, one causes the other. However, a strong correlation between two things doesn’t prove one variable causes another.

Alternative explanations

There may be many explanations for a given outcome. But we often jump to conclusions and fail to consider alternative explanations.

Selective data and appropriate comparisons

We identify the wrong cause because it seems the obvious one is based on a single observed effect.

Numbers and their meaning

Something is only cheap or expensive in relation to something else. Words like "big" or "small" have no meaning in them. A number has only a size in relation to another number.

The time value of money

Money paid in the future is worth less than the money paid today. A dollar received today is worth more than a dollar received tomorrow. If we have a dollar today, we can invest it and earn interest making that dollar worth more than a dollar in the future. This means that money has a price, and that is based on interests.

Probabilities and number of possible outcomes

The only time we can calculate the exact probability of an event in advance (over a large number of trials) is in cases where we know all possible outcomes and where all outcomes are equally likely. This is applicable for games of chance, such as tossing a coin or rolling a die.

Number of possible outcomes

The more possible outcomes a specific event has, the more they are unwanted. The more independent events needed to achieve a scenario, the less likely it is that the wanted scenario happens. Some outcomes may be less likely than others (for example, due to constraints or limits).

Mathematical expectation

Most of our decisions in everyday life are one-time bets. Choices we face only once. Still, this is not the last decision we make. There are a large number of uncertain decisions we make over a lifetime. We make bets every day. 

Chance has no memory

We tend to believe that the probability of an independent event is lowered when it's happened recently and higher when it hasn't. For example, we assume that because we experienced a string of bad events, a favorable one will soon happen. However, previous outcomes neither influence nor have any predictive value on future outcomes. 

Gains, losses, and utility

We often don't consider our total wealth when we make financial decisions. Instead, we judge a decision by evaluating changes measured in terms of short-term gains and losses. We should take a more long-term view and think in terms of wealth.

Scenarios

We often underestimate the potential events that may happen in the future or those that may cause a project to go wrong. Problems are inevitable, and things might not go as planned. Often we focus too much on the specific project case and ignore what normally happens in similar situations.

Coincidences and miracles

We notice certain things and ignore others. We select and talk about the amazing event, not the ordinary ones. We see coincidences after they happen. We underestimate the number of possibilities for "unlikely" occurrences to occur. They often happen if they have enough opportunities to occur.

Making up causes for chance events

We want to find reasons for all kinds of events. We search for patterns even where none exist. For example, something important must happen if a particular number occurs again. But it is always possible to find patterns and meaning in an event if we actively search for them, selectively pick anything that fits the pattern, and ignore everything that doesn't. But we can't predict the pattern in advance.

Believing in miracles

We often pay little or no attention to times when nothing happens. We shouldn't look at past events and find significance in the amazing ones. We need to compare cases involving no cause or effect and look at all the other things that might have happened instead.

"The brain can be developed just the same way as the muscles can be developed if one will only take the pains to train the mind to think." – Thomas Alva Edison

Models of reality

A model is an idea that helps us better understand how the world works. A valuable model produces meaningful explanations and predictions and is easy to use because if it's complicated, we don't use it.

Meaning

Words, definitions, propositions, statements, or goals don't tell us anything. We need to understand what they mean. It is the same with knowledge. Knowledge is only valuable if it's useful, and something is only useful if we understand what it means.

Rules and filters

Based on our knowledge of reality and our personal situation, we should establish some "what to do" and "what to avoid" rules. Rules could be, "Walk away from anything I don't understand or can't quantify or doesn't work. Only deal with people I trust."

Elimination

Eliminate situations that may cause great sorrow, what is not important or knowable, what can't happen or be achieved, what can't usefully be predicted or explained, what can't be tested, what is already disproved, the easy decisions, the wrong assumptions, what we can't do something about or problems where we lack competence.

Checklist procedures

Use checklist procedures. Together with other tools, they help us reduce the chance of harm. Concentrate on the critical items. If we don't check for them, we may get harmed.

Goals

Often we are surprised when people don't perform as we expect. Have goals that cause what you want to accomplish.

Alternatives

Opportunity cost

Our time and money are limited. If we decide to do one thing, we are deciding not to do another available thing. Every minute we choose to spend on one thing is a minute unavailable to spend on other things.

Quantification

Most aspects of our lives depend on our ability to quantify and understand patterns, relationships, proportions, or magnitudes. When we translate something into numbers, we can make comparisons. But some things can't be measured exactly, so estimating a range is the next best alternative.

Evidence

Evidence helps us prove what is likely to happen or likely to be true or false. Evidence comes from facts, observations, experiences, comparisons, and experiments.

The scientific process involves the following steps (trial and error, luck, and intuition):

Problem or observation—We try to figure something out. We have a problem, or we observe some phenomena and wonder what happens and why.

Guess why—We try to find a possible solution or an explanation (a hypothesis of why or how something happens) that can be proved or disproved by testing it against experiment and observation. Maybe some rule or model can solve the problem or explain our observation. Our guesses must be measurable and agree with nature and proven evidence.

Predict consequences—We work out all logical consequences of our guess and see what would be implied if our guess was right.

Test—"If I do this, what will happen?" Testability is key. We compare the implied consequences of our guess with experiment, evidence, and observation. We repeat the experiment against error, fraud, coincidence, and changes in circumstances or environment. We report our results honestly. The more evidence that agrees with our guess, the more likely the guess was right.

Backward thinking

Avoid what causes the opposite of what you want to achieve. Thinking backward, we can determine what actions must be avoided. Instead of asking how we can achieve a goal, we ask the opposite question: What don't I want to achieve (non-goal)?

Risk

We don't know the future. What if the consequences of being wrong are terrible and can cause us great harm? If the decision is important, we should largely ignore what has happened in the past and focus on the consequences of being wrong.

Attitudes

Part of avoiding misjudgments and improving our lives is having the right attitude toward life. Since people are different, there is no one-size-fits-all strategy. We each must figure out our own style. We must determine our abilities and limitations. We need to know what we don't know or are not capable of knowing and avoid those areas.