LongHaul

12. Excessive Self-Regard Tendency "We all commonly observe the excessive self-regard of man. He mostly misappraises 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 overappraises 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. Even man’s minor possessions tend to be overappraised. Once owned, they suddenly become worth more to him and he would pay if they were offered for sale to him and he didn’t already own them… And all man’s decisions are suddenly regarded by him as better than would have been the case just before he made them." "This is better known as the endowment effect. We tend to overestimate our skills, decisions, and possessions. We also prefer people similar to us. That can lead to groupthink and herd behavior which is prevalent in investing. In investing, this leads to people who think they pick stocks when they can’t, put a higher value on the investments they own, who hang out with other people who think the same, invest in the same things, and suffer the same when they’re wrong. Then they refuse to accept their lack of skill is the problem, so they collectively blame something else for their poor results. The solution is to be objective, open-minded, humble, and accepting of mistakes." Overconfidence in our abilities. How much does our own ego get in the way of our thought process and seeing reality more objectively? I think I have underestimated the effect of ego on my own thought process (and those of others) historically. Not the easiest bias to correct. We are all very ignorant about much. Recognition is a good first step. Keeping people around who will call out our stupidity also helps.

great list, but when my wife texts/emails, it cant wait Too funny about the wife! I tell people to call me if it is urgent (and a true real emergency is extraordinarily rare). Deep work by Cal Newport was a great book for those that have not read it.

Thanks for the posts everyone. Funny how many posts on food there are.... Here is a quick list that I try to stick to: 1. Try to check email 1x per day. (they can wait) 2. To do list by importance and stick to it. 3. Turn off phone alerts, texts, etc. All that stuffs kills my productivity and adds extra stress. 4. Invest in quality - companies, tools, material objects that will lasts as it minimizes buying time. 5. Research primary sources. By not wanting, there is calm..

11. Simple, Pain-Avoiding Psychological Denial "This phenomenon first hit me hard in World War II when the superathlete, superstudent son of a family friend flew off over the Atlantic Ocean and never came back. His mother, who was a very sane woman, then refused to believe he was dead. That’s Simple, Pain Avoiding Psychological Denial. 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." "Denial, avoiding pain or bad news, tends to compound problems. One way around this is being open to the fact that not everything works out the way we expect and it’s not the end of the world, despite feeling like it at the time. In investing, if a loss hurts, selling is the quick short-term answer to avoiding pain. It typically leads to worse long-term returns. The lengths investors go to, to avoid pain ultimately leads to not taking any risk — loss aversion." I think being open minded to problems, mistakes and reality - however unpleasant to hear or deal with helps.

10. Influence-from-Mere Association Tendency …there is another type of conditioned reflex wherein mere association triggers a response. For instance, 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. The correlation of quality with a higher price is abused by advertisers. Coca-cola does this. Apple does this. All luxury brands do this too. Sometimes you get what you pay for. Sometimes you pay extra for the label. Munger gives another example of someone who gambles for the first time on a low probability bet and sees it pays off. So he repeats the bet and loses, and continues to repeat it and lose because he never bothered to consider his win was pure luck. The association of winning with a low probability bet compounds stupid decisions. The solution is to weigh decisions independent of the result: Carefully examine each past success, looking for accidental, non­causative factors associated with such success that will tend to mislead as one appraises odds implicit in a proposed new undertaking.

I agree with Shane. Totally unnecessary regulatory burden and allows legal theft of trade ideas.

9. Reciprocation Tendency "The human 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, where it increases hatred to a level causing very brutal conduct…" "Reciprocity Tendency subtly causes many extreme and dangerous consequences, not just on rare occasions but pretty much all the time. Thanks to the Kantian fairness tendency, we tend to return favors. But that reciprocation can be manipulated so that someone performs “favors” they wouldn’t normally agree to do. Munger gives an example by Robert Cialdini who asked people to volunteer for a huge favor that no one would agree to (babysit troublemakers for two years), only to concede to a smaller, but still ridiculous request (take troublemakers to the zoo). The fact that people can be easily manipulated to do something they never would do in the first place, should be troubling. Marketing techniques and negotiations are two areas to watch for this. One solution is to get really good at saying, “No!” Another solution is to stop and think about what you’re agreeing to — even if it takes hours — before deciding." ============================================================================================================ When you start getting stuff for free from a business you should be thinking about reciprocation tendency. Free coffee at the Car dealer, Free tickets from the Time share tour, free lunch for some investment program or just an individual manipulating you. And one does not (generally) want to be reciprocating negatives from others. Hatred brings more hatred and anger, etc. I think the philosophers code is to return benefits for harm.

8. Envy/Jealousy Tendency 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 deep in human nature… Envy/jealousy is extreme in myth, religion, and literature wherein, in account after account, it triggers hatred and injury. Swap food for anything — money, love, power, recognition, material possessions, investment returns — someone has what another person wants and you get the seeds of envy and jealousy that can lead to resentment and hate. As I have shared the observation of life with Warren Buffett over decades, I have heard him wisely say on several occasions: “It is not greed that drives the world, but envy.” ======================================================================= Envy is a really big one that will mess you up. It really messes up thinking rationally in a big way. People can do all types of stupid things that are contrary to their goals and interests. It is almost like an invisible force that pulls you towards what others are doing whether logical or not. I think FOMO might be a form of envy because by participating it is a way to avoid the pain of envy/regret in the future (maybe - I am still thinking about this) One antidote is to see, read or watch someone who has much less than you. Hard to feel bad/envious of not getting that big fancy house after driving by a homeless person.

good stuff on masks. thx Liberty. Has anyone seen any research on Covid and transmission from the salt water at the beach? Salt water can be be aerosolized at the beach from the waves. If anyone sees any research, would be great to read about it.

So how would we make dumb decisions based on this Fairness Tendency? Where would our minds go bad? Random stuff from the Wikipedia page cited above "Game theory One form of the categorical imperative is superrationality.[23][24] The concept was elucidated by Douglas Hofstadter as a new approach to game theory. Unlike in conventional game theory, a superrational player will act as if all other players are superrational too and that a superrational agent will always come up with the same strategy as any other superrational agent when facing the same problem." Perhaps Buffett and Munger surround themselves with the super rational in mgmt. Simplifies and optimizes everything.

I saw a study awhile back that ~70% of flu transmission was prevented when masks were worn by a parent caring for a child with the flu. It was not 100% wearing either, more intermittent. Some people are anti-maskers down here in Texas.... "You can always tell a Texan, but you can't tell him much." As the fear level rises down here people are getting more serious about masks - even the right wing politicians. So that it good!

7. Kantian Fairness Tendency "Kant was famous for his “categorical imperative,” a sort of a “golden rule” that requires humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody. And it is not too much to say that modern accultured man displays, and expects from others, a lot of fairness as thus defined by Kant." "Who knew that when you’re generally nice to people — show a mild level of decency — that people are nice back. Of course, not everyone follows along. The random jerk exists. Trolls provoke. You can take it personally, get angry, and burn a ton of time and energy on it. Or you can not sweat the small stuff." If someone could explain how this bias could end up affecting our decision making it would be most appreciated.

Coronavirus: Dexamethasone proves first life-saving drug ~30% reduction in risk of death for those on ventilators. https://www.bbc.com/news/health-53061281 The longer everyone can hold out the more optionality there is on a lower rate of death, etc.

Li Lu Book Documentary - it is riveting. Sounds like he had a lot of adversity to go thru and I genuinely admire him. Moving the mountain: My life in China from the cultural revolution to Tiananmen Square Hardcover – January 1, 1990 by Lu Li (Author) This is the 1st episode of 7 2nd Episode and they follow until episode 7

Those were great!

6. Curiosity Tendency Curiosity, 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. General curiosity is the great eliminator of what Munger calls the “man with a hammer” syndrome. It loosens fixed beliefs, opens minds, and generally works against the inconsistency/avoidance tendency. One interesting thought is that I think by far the most important learning occurs after formal education ends. If we have 2 people - one never goes to college but keeps learning something new everyday for decades and another goes to an Ivy League college and then almost stops learning, the continuous learner will blow past the Ivy League grad in wisdom.

5. Inconsistency-Avoidance Tendency 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… It is important not to thus put one’s brain in chains before one has come anywhere near his full potentiality as a rational person. Simply, people are averse to change. We’re creatures of habit. Anyone who’s ever attempted to remove a bad habit or start a good habit knows how difficult that change can be, even when we know the habit is bad. When it comes to ideas, the solution is to attack confirmation bias head-on. Follow Darwin’s example. Purposely seek out counterarguments before coming to a conclusion.

Any other stories of Oaktree that people can think of? 2 have already been mentioned and there could be more.

Thanks FKW. Excellent points. To avoid such a rigid mindset I think it helps to also think in probabilities. There is always a chance everyone is wrong about anything. Nothing is 100%. So if we allow a 5% chance that we are wrong about something (or perhaps anything) we think is a high probability, then we leave our mind open for new disconfirming information. It is an interesting term - an open mind. To me it suggests that information can get in, and out.

I am in the Houston area where cases are up here and in Texas (see link) and my sense is that: 1. People are taking more risk as the see others they know going out, etc. (Social proof, overconfidence) 2. On the plus side a lot of people are wearing masks. 3. But - Houston is hot and humid - so cases are up even with higher temperatures, more sun and high humidity https://www.houstonchronicle.com/coronavirus/article/covid-interactive-map-houston-texas-us-case-virus-15142609.php I personally think that Covid 19 goes way up in many parts of the US - especially when it cools down. The secondary effect of people going out and taking more chances is that many more people could get Covid-19 and it is not a zero chance that it gets so bad the hospital beds become full. When people see that on the news then they will get REALLY scared again. That would really tank the economy again. Hard to predict though. The more confident people are the more dangerous the virus danger is.

Covid Roulette!

Sorry - this should of been a separate thread as I think it might be better to separate the biases. 4. Doubt-Avoidance Tendency The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt-Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors. Being able to jump to conclusions comes in handy when chased by a man-eater. It’s less so when the instinctual need to run kicks in during a market crash. But then there’s doubt in general, that can lead to added stress and anxiety around decisions. That can lead to putting off a decision entirely. I would add that saying "I don't know can also be difficult to say/admit." but if we put aside our egos that is often the best answer. Antidote: Thinking of how much we really know, may not know and leaving open the conclusion to disconfirming information until we get the right information. Thoughts? Stories? Modify message Report to moderator 151.213.145.33 ======================================================================================================================== DooDiligence Hero Member ***** Posts: 2268 ♪ ♫ ♪ ♫ View Profile Email Personal Message (Offline) Re: 4. Doubt-Avoidance Tendency « Reply #24 on: Today at 07:18:55 AM » Quote Quote from: LongHaul on June 06, 2020, 04:02:55 PM 4. Doubt-Avoidance Tendency The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt-Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors. Being able to jump to conclusions comes in handy when chased by a man-eater. It’s less so when the instinctual need to run kicks in during a market crash. But then there’s doubt in general, that can lead to added stress and anxiety around decisions. That can lead to putting off a decision entirely. I would add that saying "I don't know can also be difficult to say/admit." but if we put aside our egos that is often the best answer. Antidote: Thinking of how much we really know, may not know and leaving open the conclusion to disconfirming information until we get the right information. Thoughts? Stories? I think this has contributed to the popularity of questionable media outlets, including hyped up financial news / analysis. People are lazy and like to have difficult things explained to them (religion, politics, finance) & will accept most of what comes from pretty pundits at face value. Then again, what do I know?

4. Doubt-Avoidance Tendency The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt-Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors. Being able to jump to conclusions comes in handy when chased by a man-eater. It’s less so when the instinctual need to run kicks in during a market crash. But then there’s doubt in general, that can lead to added stress and anxiety around decisions. That can lead to putting off a decision entirely. I would add that saying "I don't know can also be difficult to say/admit." but if we put aside our egos that is often the best answer. Antidote: Thinking of how much we really know, may not know and leaving open the conclusion to disconfirming information until we get the right information. Thoughts? Stories?

Great idea for a thread 1. Oaktree - Screwed minority bondholders in a variety of ways in PHI Bankruptcy - made super complex filings, opaque, high fees for capital and high percentage of equity at low valuation for new money. 2. I would basically add almost all other distressed debt players - or at least be super cautious of them. 3. I would also be very careful of any P/E company - they typically gut the company and jack up prices and load up the company with debt. All else equal most companies are worth less owned by a P/E firm than not.

Who exactly encourages the protests and the property damage (which was done by looters not protesters)? The protests are unfortunate, but they were not organized by any party and they are not Trump’s fault either. He just poured gasoline on them by sending the national guard and the tweeting stuff like “after looting comes the shooting”, which surely didn’t help. Indeed, Trump is not the leader America needs in tough times. Below is the Robert F. Kennedy speech which is worth a listen in times like this. That was one of the best speeches I have every heard in my life. Thank You so much for posting. Just amazing.