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Another Lesson With Charlie

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March 12, 2011 – Comments (1)

Dear Fools,

Picking up where we left off last week, here is tendency #4 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #4 – Doubt-Avoidance Tendency

Have you ever noticed how whenever we have some kind of decision that needs to be made, we tend to just want to get it over with? Regardless of the outcome, and many times when the situation becomes more and more stressful, we as humans seem to be programmed to just want some finality in the situation, whatever it may be. Such is the nature of the Doubt-Avoidance tendency.

Think about a judge and/or jury for a moment. So powerful is this idea of just reaching a decision and removing all doubt that we have it set up in our judicial system that deciders must take the time to deliberate; lest they reach a decision based purely on emotion and no fact in the matter.

So why do we just want finality? Typically it’s a cause of one of two triggers (or some combination of the two):

•  Puzzlement; and
•  Stress

A great example in investing can be seen when news hits a stock we own. Specifically in a situation where some news has hit a stock and its price is falling as you look at the screen. What do you do? Is there enough time to make an informed decision? Should you hold or sell? Or buy more? It’s not an easy answer at all. But being well informed on the stock in the first place can help check this. Imagine if you saw some news blurb that came out and you could immediately recognize whether it was a valid threat or just “noise” as Taleb might call it?

Therein lies the importance of knowing what you’re invested in and keeping a record of why you're invested in it. Sometimes it’s these moments of puzzlement and stress that open the window of opportunity for us as investors.

Foolishly,

Jason (TMFJMo)

Starbucks

It’s official: Starbucks and Green Mountain are hooking up. Granted the terms are still under wraps, but there are plenty of implications to talk about, over coffee of course. http://bit.ly/gv46Ne

Straight from the Onion

I never really got the whole Charlie Sheen thing anyway: http://onion.com/hvRwvR

1 Comments – Post Your Own

#1) On March 12, 2011 at 4:51 PM, checklist34 (99.71) wrote:

haha at the onion link. 

in occasional doses, the onion is the greatest

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