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Charlie Munger Continued

Recs

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March 06, 2011 – Comments (0)

Dear Fools,

Picking up where we left off last week, here is tendency #3 in Charlie Munger’s take on the psychology of human misjudgment from Poor Charlie’s Almanack.

Tendency #3 – Disliking/Hating Tendency

Just as with the loving and liking tendency addressed last week, the disliking/hating tendency is something that is with us at a very early point in life. In fact Munger observes that we are born with these primitive emotions. The growing popularity of smear campaigns and negative advertisements in American politics for example shows that some people just have a natural talent for it; like they’ve been working at it since birth.

So how does this tendency manifest itself? Three primary ways are:

•  We ignore the positive virtues in the things or people we dislike;
•  We dislike people and things that are even associated with the object of our dislike; and
•  We distort the truth; bend reality to conform to our dislikes and hatred.

The past few years have created an environment where it has been really easy to hate. From polarizing politics to the financial crisis and recession that followed, people have really taken to hating and disliking someone or something. We need to assign blame, so we look for the quickest avenue and let ‘er rip.

But just because banks screwed up, are all banks bad? Are all banks awful investments? Of course not. Granted they made it a lot more difficult to find the good ones, but they’re out there. And how about the Gulf spill? An awful and tragic event no doubt, but are all oil companies bad? Are they all bad investments? Are you a bad person for investing in oil companies? My answer to all three (predictably I’m sure) is no. What’s more, as investors it was a wonderful time to take advantage of the blanketed disapproval and find the winners among them. Opportunistic? Yes. Do I hate what BP and the responsible parties caused? You bet I do. And that’s the point I think. We as humans will hate. We can’t help it. But as investors, we can train ourselves to control these negative emotions and take advantage when the opportunities do arise.

Foolishly,

Jason (TMFJMo)

GulfMark Offshore

In case you missed it, here’s my video update on GulfMark and news from the Gulf: http://bit.ly/eDXDs7

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