Berkshire Hathaway executives Charlie Munger and Warren Buffett are business partners and friends who share a lot in common. One crucial similarity is their dedication to sharing the advice they have garnered over the years.
Between 1992 and 1995, Munger gave several speeches on the intersection of psychology and economics. During one speech at Harvard University, the Berkshire Hathaway vice chairman asked, "How could economics not be behavioural? If it isn't behavioural, what the hell is it?"
Munger explained that he doesn't have much interest in teaching other people how to get rich.
"That isn't because I fear the competition or anything like that - Warren has always been very open about what he's learned, and I share that ethos," he said.
His desire to get rich was so he could be independent, he explained, and do other things he was interested in, such as giving these types of talks on business and human biases. Munger felt that natural and conditioned responses could be the reason why people make certain career decisions.
Based off of studies from sociologists, psychologists and other researchers, Munger noted 24 psychological tendencies that he's aware of when making business and career decisions.
Recently, investment firm Tiny Capital and animation studio Thinko created an animated, abridged version of this speech:
Here are three tendencies Munger highlights that he tries to avoid while making decisions.
Bias from envy and jealousy
"Envy and jealousy made, what, two out of the ten commandments?" Munger asks.
He notes that these two feelings are common to anyone who has raised siblings or tried to run a law firm, investment bank or a faculty.
"I've heard Warren say a half a dozen times, 'It's not greed that drives the world, but envy,'" Munger says.
Accepting delusional beliefs
In the speech, Munger describes how people create false realities to avoid the truth. He describes a family friend who had an outstanding student-athlete son.
"[He] flew off a carrier in the North Atlantic and never came back, and his mother, who was a very sane woman, just never believed that he was dead," Munger says.
"That's simple psychological denial. The reality is too painful to bear, so you just distort it until it's bearable," Munger says. "We all do that to some extent, and it's a common psychological misjudgment that causes terrible problems."
Making closed-minded judgments about people
Munger argues people like to stick to what is familiar, for better or for worse, and calls this "liking distortion."
He says this is "the tendency to especially like oneself, one's own kind and one's own idea structures." This can also make someone "especially susceptible to being misled by someone liked."
On the flip side, he details disliking distortion as "the tendency not to learn appropriately from someone disliked."
For example, there are shown benefits of keeping an open mind when communicating with someone you might dislike. This can be a challenge toward becoming a better communicator and overall person.