The video above shows Charlie Munger, Warren Buffet's business partner, breaking down what we now call the 25 cognitive biases. If you want to understand human behavior and how it shapes everything you experience in your life, you should watch this video over and over again. Below, we will also get into more detail regarding the 25 cognitive biases from Munger's transcripts from this talk at Harvard University

First, let's list the 25 Cognitive Biases:

1. Reward and Punishment Superresponse Tendency.

2. Liking/Loving Tendency.

3. Disliking/Hating Tendency.

4. Doubt-Avoidance Tendency.

5. Inconsistency Avoidance Tendency.

6. Curiosity Tendency.

7. Kantian Fairness Tendency.

8. Envy/Jealousy Tendency

9. Reciprocation Tendency.

10. Influence From Mere Association Tendency.

11. Simple, Pain-Avoiding Psychological Denial.

12. Excessive Self-Regard Tendency.

13. Over Optimism Tendency.

14. Deprival Super Reaction Tendency.

15. Social Proof Tendency.

16. Contrast Misreaction Tendency.

17. Stress Influence Tendency.

18. Availability Misweighing Tendency.

19. Use It Or Lose It Tendency.

20. Drug Misinfluence Tendency.

21. Senescence Misinfluence Tendency.

22. Authority Misinfluence Tendency.

23. Twaddle Tendency.

24. Reason Respecting Tendency.

25. Lollapalooza Tendency.

Now, let's go through each of these biases and tendencies and see if we can briefly summarize what Charlie Munger was working to help us understand. In a future set of articles, we'll cover each bias in more detail using videos I'll shoot to discuss them with you.

The reward and punishment tendency has to do with incentives. Even one of the premier laws of economics states that people respond to incentive. Munger said during the video above that,

"I place this tendency first in my discussion because almost everyone thinks he fully recognizes how important incentives and disincentives are in changing cognition and behavior. But this is not often so. For instance, I think I’ve been in the top five percent of my age cohorts almost all my adult life in understanding the power of incentives, and yet I’ve always underestimated that power. Never a year passes but I get some surprise that pushes a little further my appreciation of incentive superpower."

We tend to support people we like even if we are aware of critical flaws in their character. If we like you, chances are we will follow you and buy from you, even if you are less than perfect. Here's what Charlie had to say about it:

"What will a man naturally come to like and love, apart from his parent, spouse and child? Well, he will like and love being liked and loved. And so many a courtship competition will be won by a person displaying exceptional devotion, and man will generally starve, lifelong, for the affection and approval of many people not related to him."

On the flip side, we tend to reject people we dislike or hate regardless of how objectively amazing they may be. Here's what Charlie had to say about it.

"Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to ignore virtues in the object of dislike"

Humans have survived for millennia by being able to eliminate doubt and make in-the-moment decisions. One could absolutely see how this ability would be essential for survival thousands of years ago. However, in the modern world, we are not faced with the same existential challenges as we once were. Thus, we tend to still want to eliminate doubt, sometimes too quickly, when making and acting upon decisions. Here's what Charlie has to say about this tendency:

So pronounced is the tendency in man to quickly remove doubt by reaching some decision that behavior to counter the tendency is required from judges and jurors. Here, delay before decision making is forced. And one is required to so comport himself, prior to conclusion time, so that he is wearing a “mask” of objectivity. And the “mask” works to help real objectivity along, as we shall see when we next consider man’s Inconsistency-Avoidance Tendency.

Once our minds are made up, we don't like to change or be challenged. One interesting place I see this play out is in sports fandom. My brother is a Philadelphia Eagles fan simply because of a bathrobe our mother bought him when we were kids. He's never deviated from that fandom despite the team's inability to win the big game. Charlie Munger puts it this way:

"The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance. We see this in all human habits, constructive and destructive. Few people can list a lot of bad habits that they have eliminated, and some people cannot identify even one of these. Instead, practically everyone has a great many bad habits he has long maintained despite their being known as bad. Given this situation, it is not too much in many cases to appraise early-formed habits as destiny. When Marley’s miserable ghost says, “I wear the chains I forged in life,” he is talking about chains of habit that were too light to be felt before they became too strong to be broken."

Curiosity is a tendency we should nurture with every given opportunity. Charlie explains why this way:

uriosity, enhanced by the best of modern education (which is by definition a minority part in many places), much helps man to prevent or reduce bad consequences arising from other psychological tendencies. The curious are also provided with much fun and wisdom long after formal education has ended.

Think about how you can apply this to your career, relationships and life in general.

When you think of Kantian Fairness, think of the Golden Rule. Here's what Charlie had to say:

"In a small community having a one-way bridge or tunnel for autos, it is the norm in the United States to see a lot of reciprocal courtesy, despite the absence of signs or signals. And many freeway drivers, including myself, will often let other drivers come in front of them, in lane changes or the like, because that is the courtesy they desire when roles are reversed. Moreover, there is, in modem human culture, a lot of courteous lining up by strangers so that all are served on a “first- come-first-served” basis."

Envy has always been an interesting monster to me. If I have something, why would you envy me instead of asking me how I got it? Charlie explains why this might be the case:

"A member of a species designed through evolutionary process to want often-scarce food is going to be driven strongly toward getting food when it first sees food. And this is going to occur often and tend to create some conflict when the food is seen in the possession of another member of the same species. This is probably the evolutionary origin of the Envy/Jealousy Tendency that lies so deep in human nature. Sibling jealousy is clearly very strong and usually greater in children than adults. It is often stronger than jealousy directed at strangers. Kantian Fairness Tendency probably contributes to this result."

Is it an 'eye for an eye' or 'turn the other cheek?' According to Charlie Munger, it's both:

"The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as it is in apes, monkeys, dogs, and many less cognitively gifted animals. The tendency facilitates group cooperation for the benefit of members. In this respect; it mimics much genetic programming of the social insects. We see the extreme power of the tendency to reciprocate disfavors in some wars, wherein it increases hatred to a level causing very brutal conduct. For long stretches in many wars, no prisoners were taken; the only acceptable enemy a dead one. And sometimes that was not enough, as in the case of Genghis Khan, who was not satisfied with corpses. He insisted on their being hacked into pieces."

Have you ever mistaken a correlation for causation? If so, you've been the victim of this tendency. Check out what Charlie Munger says about this bias:

"consider the case of many men who have been trained by their previous experience in life to believe that when several similar items are presented for purchase, the one with the highest price will have the highest quality. Knowing this, some seller of an ordinary industrial product will often change his product’s trade dress and raise its price significantly hoping that quality-seeking buyers will be tricked into becoming purchasers by mere association of his product and its high price. This industrial practice frequently is effective in driving up sales and even more so in driving up profits. "

Charlie covers this better than I ever could, so check out what he had to say about this cognitive bias:

"The reality is too painful to bear, so one distorts the facts until they become bearable. We all do that to some extent, often causing terrible problems. The tendency’s most extreme outcomes are usually mixed up with love, death, and chemical dependency."

No one ought think of themselves more highly than they should. That's an old bible quote, but it's valid regarding this bias. If I'm not mistaken, people like Hitler struggle heavily with this cognitive bias and tendency. Here's how Charlie breaks it down:

"We all commonly observe the excessive self-regard of man. He mostly mis-appraises himself on the high side, like the ninety percent of Swedish drivers that judge themselves to be above average. Such misappraisals also apply to a person’s major “possessions.” One spouse usually over appraises the other spouse. And a man’s children are likewise appraised higher by him than they are likely to be in a more objective view. "

If you are hoping for something good to go down, your actions should map to it happening. Merely hoping will get you nowhere. Here's how Charlie put it:

"About three centuries before the birth of Christ, Demosthenes, the most famous Greek orator, said, “What a man wishes, that also will he believe.”"

At it's core, Deprival Superreaction Tendency is really risk and loss aversion. It's said that we humans struggle twice as hard with loss and we rejoice with gains. Here's Charlie's take:

"The quantity of man’s pleasure from a ten dollar gain does not exactly match the quantity of his displeasure from a ten-dollar loss. That is, the loss seems to hurt much more than the gain seems to help. Moreover; if a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away. I include the natural human reactions to both kinds of loss experience – the loss of the possessed reward and the loss of the almost-possessed reward under one description, Deprival Superreaction Tendency."

Social Proof Tendency in its purest form is peer pressure. Charlie sums this up well:

"In advertising and sales promotion, Social-Proof Tendency is about as strong a factor as one could imagine. “Monkey-see, monkey-do” is the old phrase that reminds one of how strongly John will often wish to do something, or have something, just because Joe does or has it. One interesting consequence is that an advertiser will pay a lot to have its soup can, instead of someone else’s, in a movie scene involving soup consumption only in a peripheral way."

I'm gonna let Charlie explain this one:

"Contrast-Misreaction Tendency is routinely used to cause disadvantage for customers buying merchandise and services. To make an ordinary price seem low, the vendor will very frequently create a highly artificial price that is much higher than the price always sought, then advertise his standard price as a big reduction from his phony price. Even when people know that this sort of customer manipulation is being attempted, it will often work to trigger buying. This phenomenon accounts in part for much advertising in newspapers. It also demonstrates that being aware of psychological ploys is not a perfect defense. When a man’s steps are consecutively taken toward disaster, with each step being very small, the brain’s Contrast-Misreaction Tendency will often let the man go too far toward disaster to be able to avoid it."

Humans often make bad decisions under great stress. Charlie expounds on this idea in this way:

"Everyone recognizes that sudden stress, for instance from a threat, will cause a rush of adrenaline in the human body, prompting a faster and more extreme reaction. And everyone who has taken Psych 101 knows that stress makes Social-Proof Tendency more powerful."

I once heard Nolan Bushnell say that, "people will accept a simply lie before they will accept a complicated truth." Enter the Availability Misweighing Tendency or cognitive bias. Here's what Charlie Munger has to say on the matter:

"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 it is blocked from recognizing because it is heavily influenced by one or more psychological tendencies bearing strongly on it, as the fellow is influenced by the nearby girl in the song. And so the mind over weighs what is easily available and thus displays Availability-Misweighing Tendency."

This one is fairly self-explanatory. But, for continuity, let's listen to what Charlie has to say about this cognitive bias:

"All skills attenuate with disuse. I was a whiz at calculus until age twenty, after which the skill was soon obliterated by total non use. The right antidote to such a loss is to make use of the functional equivalent of the aircraft simulator employed in pilot training. This allows a pilot to continuously practice all of the rarely used skills that he can’t afford to lose."

This tendency’s destructive power is so widely known to be intense, with frequent tragic consequences for cognition and the outcome of life, that it needs no discussion here to supplement that previously given under “Simple, Pain-Avoiding Psychological Denial.”

With advanced age, there comes a natural cognitive decay, differing among individuals in the earliness of its arrival and the speed of its progression. Practically no one is good at learning complex new skills when very old. But some people remain pretty good in maintaining intensely practiced old skills until late in life, as one can notice in many a bridge tournament.

The abuse or misuse of power is a killer. According to Charlie, here's how it's able to take place

"Living in dominance hierarchies as he does, like all his ancestors before him, man was born mostly to follow leaders, with only a few people doing the leading. And so, human society is formally organized into dominance hierarchies, with their culture augmenting the natural follow-the-leader tendency of man."

The tendency to waste time on frivilous things exists in all of us. Charlie says it this way:

"Man, as a social animal who has the gift of language, is born to prattle and to pour out twaddle that does much damage when serious work is being attempted. Some people produce copious amounts of twaddle and others very little."

In all actions, it's the 'why' that matters most. The challenge here is that our tendency to respect reasoning means we can follow ineffective orders that communicate purpose even if the purpose is flawed. Here's Charlie's take:

"Few practices, therefore, are wiser than not only thinking through reasons before giving orders but also communicating these reasons to the recipient of the order."

The Tendency to Get Extreme Consequences from Confluences of Psychological Tendencies Acting in Favor of a Particular Outcome