The Psychology of Human Misjudgement

Charlie Munger on why humans make horrible decisions

Everybody knows about Warren Buffett, but few people outside of the investing world know about his business partner, Charlie Munger. While Buffett’s life has a singular focus on business and investing, Charlie is a Benjamin Franklin styled polymath with interests ranging from architecture (he refused to donate a dormitory to The University of California unless he could specify its exact design), to theoretical physics (he often hosts dinner parties with the world’s top physicists and holds his own), to psychology (which he’s lectured about at Harvard).

Last year, I came across the aforementioned lecture that he gave at Harvard back in 1995. It’s called ‘The Psychology of Human Misjudgement’ and it’s about the many ways that we fool ourselves into making horrible decisions in business, investing, and life. My business partner Chris and I spent months listening to it over and over again in our cars in order to drill it into our heads, and it has saved us from making a ton of idiotic mistakes ever since.

While there’s a small subset of investing nerds who are willing to listen to a crackly hourlong recording of an old man talking about psychological biases, we wanted to share it with a larger audience. So, over the past six months we’ve been hard at work with the amazingly talented folks over at Thinko to create an abridged and animated version of the speech. We couldn’t be more excited to share it with the world. Watch it, learn up, and share if you enjoy.

Listen to the full 1 hr 15 min speech or read the transcript.

Required reading about Munger:

• The Tao of Charlie Munger by David Clark
• Charlie Munger: The Complete Investor by Tren Griffin
• Poor Charlie Almanac by Peter Kaufman & Charlie Munger
• Seeking Wisdom: From Darwin to Munger by Peter Bevelin