The standard causes of human misjudgment, according to Charlie Munger, are:
1. Under-recognition of the power of what psychologists call ‘reinforcement’ and economists call ‘incentives.’
2. Simple psychological denial.
3. Incentive-cause bias, both in one’s own mind and that of ones trusted advisor, where it creates what economists call ‘agency costs.’
4. Bias from consistency and commitment tendency, including the tendency to avoid or promptly resolve cognitive dissonance. Includes the self-confirmation tendency of all conclusions, particularly expressed conclusions, and with a special persistence for conclusions that are hard-won.
5. Bias from Pavlovian association, misconstruing past correlation as a reliable basis for decision-making.
6. Bias from reciprocation tendency, including the tendency of one on a roll to act as other persons expect.
7. Bias from over-influence by social proof — that is, the conclusions of others, particularly under conditions of natural uncertainty and stress.
8. What made these economists love the efficient market theory is the math was so elegant.
9. Bias from contrast-caused distortions of sensation, perception and cognition.
10. Bias from over-influence by authority.
11. Bias from deprival super-reaction syndrome, including bias caused by present or threatened scarcity, including threatened removal of something almost possessed, but never possessed.
12. Bias from envy/jealousy.
13. Bias from chemical dependency.
14. Bias from mis-gambling compulsion.
15. Bias from liking distortion, including the tendency to especially like oneself, one’s own kind and one’s own idea structures, and the tendency to be especially susceptible to being misled by someone liked. Disliking distortion, bias from that, the reciprocal of liking distortion and the tendency not to learn appropriately from someone disliked.
16. Bias from the non-mathematical nature of the human brain in its natural state as it deal with probabilities employing crude heuristics, and is often misled by mere contrast, a tendency to overweigh conveniently available information and other psychologically misrouted thinking tendencies on this list.
17. Bias from over-influence by extra-vivid evidence.
18. Mental confusion caused by information not arrayed in the mind and theory structures, creating sound generalizations developed in response to the question “Why?” Also, mis-influence from information that apparently but not really answers the question “Why?” Also, failure to obtain deserved influence caused by not properly explaining why.
19. Other normal limitations of sensation, memory, cognition and knowledge.
20. Stress-induced mental changes, small and large, temporary and permanent.
21. Other common mental illnesses and declines, temporary and permanent, including the tendency to lose ability through disuse.
22. Development and organizational confusion from say-something syndrome.
The speech’ transcription available here.