TIP739: THE PSYCHOLOGY OF HUMAN MISJUDGEMENT

W/ KYLE GRIEVE

24 July 2025

On today’s episode, Kyle Grieve discusses Charlie Munger’s legendary speech, The Psychology of Human Misjudgment, and unpacks all 25 of his cognitive biases that often lead even the most intelligent people to make poor decisions. Drawing from Poor Charlie’s Almanack, Kyle explores how these psychological tendencies—like incentive-caused bias, social proof, and inconsistency avoidance—can distort our thinking in business, investing, and everyday life. He blends Munger’s timeless wisdom with real-world investing examples, personal experiences, and practical strategies to help listeners make better, more rational decisions.

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IN THIS EPISODE, YOU’LL LEARN:

  • Why incentives quietly override moral behavior.
  • Why liking and disliking an investing thesis can distort reality.
  • Why doubt avoidance cause investors to take significant risks in things like IPOs.
  • How inconsistency avoidance causes a lazy creep into our thinking processes.
  • How to avoid the destructive effects of reciprocation.
  • The dangers of overestimating our abilities.
  • Why jumping off a sinking ship beats trying to patch it up.
  • Why contrasting stock prices in exuberant markets evaporates margins of safety.
  • Why investors should choose simplicity > complexity.
  • Why you should search for Lollapalooza effects in business.
  • And so much more!

 

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

 

[00:00:00] Kyle Grieve: Charlie Munger wasn’t just Warren Buffett’s partner, he was a towering intellect who profoundly influenced how countless people think about decision making, investing, and life. While he’s primarily known for helping to build Berkshire Hathaway into the giant that it is today, I think Charlie’s real legacy was his clarity of thought, which was portrayed exquisitely.

[00:00:18] Kyle Grieve: In one speech he gave titled The Psychology of Human Misjudgment. In this episode, we’re looking at one of Charlie’s greatest contributions to the world. A framework for understanding the psychological traps that lead otherwise smart and successful people to make dumb decisions. We’ll unpack all 25 of his tendencies, starting with how incentives shape behavior often more powerfully than we even realize, and how misaligned incentives can create disastrous outcomes.

[00:00:44] Kyle Grieve: We’ll look at how our affection for a company products or even a person can blind us to incredibly obvious facts and why emotional attachment can be very, very dangerous. We’ll also look at why our brains crave certainty and consistency, even when staying flexible and open-minded would serve us much better.

[00:01:03] Kyle Grieve: Then we’ll transition and look at the powerful pull of the crowd and why investors must learn to stand apart from the herd. And lastly, we’re going to look at probably one of my favorite tendencies, which is when multiple biases combined to produce extreme outcomes that can cause massive successes or crushing busts.

[00:01:19] Kyle Grieve: Now, Charlie truly believed that avoiding stupidity was more critical than seeking cleverness. By understanding how to avoid mistakes. By recognizing these misjudgments, we would have no choice but to improve at investing and in life itself. These tools are truly timeless, practical, and deeply rooted in human psychology.

[00:01:38] Kyle Grieve: So if you’re an investor looking to sharpen your mind and add a few new tools to optimize your thinking, a business leader striving for improved judgment, or simply someone trying to make fewer dumb decisions, this episode is for you. Now let’s get right into this week’s episode on The Psychology of Human Misjudgment.

[00:01:58] Intro: Since 2014 and through more than 180 million downloads, we’ve studied the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Kyle Grieve.

[00:02:22] Kyle Grieve: Welcome to The Investor’s Podcast. I’m your host, Kyle Grieve, and today we’re discussing one of my favorite chapters from one of my favorite books, Poor Charlie’s Almanack, and specifically, we’re going to look at the chapter on the psychology of human misjudgment. Yes, we’re only going to cover a single chapter from the book just because I think it alone contains just a wealth of incredibly, incredibly valuable information.

[00:02:44] Kyle Grieve: To be honest, while prepping for this, I probably could have even dove a little deeper into each of these tendencies. But for the sake of time, I think you’ll enjoy exactly how I weave this into both investing and how to use and think about these misjudgments in that light. So let’s jump right into it.

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