Contrast-Caused Distortions of Sensation, Perception and Cognition

This article is part of a multi-part series on human misjudgement by Charlie Munger. The sensation apparatus of man is over-influenced by contrast – it has no absolute scale but it has a contrast scale. And it’s a scale with quantum effects too – it takes a certain percentage chance before it’s noticed. Here the great truth is… Continue reading Contrast-Caused Distortions of Sensation, Perception and Cognition

Reciprocity Bias

This article is part of a multi-part series on human misjudgement by Charlie Munger. What Is Reciprocation Tendency? Has a car salesman ever offered you a cup of coffee or a glass of water upon entering the dealership? Have you been handed a free sample of a product as a gift? These small acts are meant to… Continue reading Reciprocity Bias

Consistency and Commitment Tendency Bias

This article is part of a multi-part series on human misjudgment by Charlie Munger. Consistency and commitment tendency is “a super-power in error-causing psychology tendencies”, “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.” “What I’m saying here is… Continue reading Consistency and Commitment Tendency Bias

Bias from Pavlovian Association

This article is part of a multi-part series on human misjudgment by Charlie Munger. Bias from Pavlovian association is misconstruing past correlation as a reliable bias for decision making. “So the dog salivated when the bell rang – so what? The truth is that it is an enormously powerful force in the life of all of us. We… Continue reading Bias from Pavlovian Association

Types of Moats in Business

“We have found in a long life that one competitor is frequently enough to ruin a business.” Charlie Munger Companies with moats are more likely to reliably increase their intrinsic value over time, so if you wind up buying their shares at a valuation that (in hindsight) is somewhat high, the growth in intrinsic value… Continue reading Types of Moats in Business

What to look for while reading the annual report?

Seeking Wisdom

I have been developing a new habit for the last ten days. What’s that habit? I have been listening to Berkshire’s Annual General Meeting (AGM) starting from 1994. How long will I take to complete it all? There are 25 AGMs, and each one would be 5 hours long. If I spend 1.5 hours on average every day, then I should be able to finish it all in three months. How on earth can I get an extra 1.5 hours every day?

When there is a will, there’s a way. I have been listening to the recordings while commuting and before falling asleep. I am wrapping up with 1996 today. While listening to the recordings, I came across an interesting piece in which Buffett and Munger spoke about the importance of being numerate, the protocol for reading the annual report, and what to look for while reading the annual report. This…

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Fragility and Optionality in business Models

“Fragility and optionality in business models” by Prof. Sanjay Bakshi. Key takeaways are as follows. Fragility as defined in Cambridge dictionary means the quality of getting easily damaged. In business context fragility would mean the business being vulnerable to the fragility. There are various factors which can make business vulnerable to fragility. This fragility can… Continue reading Fragility and Optionality in business Models