Monday, January 13, 2014

What I've Been Reading

Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger by Peter D. Kaufman (Editor) and Charles T. Munger (Author). The quote on the very first page made me smile:

"Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives a little temporary unpopularity with your peer group... then to hell with them." 

Merriam Webster dictionary defines Chutzpah as:

Personal confidence or courage that allows someone to do or say things that may seem shocking to others

Call me opinionated but I have great admiration for people with chutzpah and who seek wisdom lifelong (as a matter of fact wisdom is my favorite word much higher than love). Charlie is a living synonym for chutzpah and boy, do I admire him :-) !!

I cannot being to quote from this life changing book. Do yourself a favor - spend $50 and buy this book (my friend used those exact words with me); all my favorite people - E.O.Wilson to Richard Thaler and Cicero to Ben Franklin are Charlie's favorites too. The only know route for a good life is to create mental models, yeah its a fact. 

Lollapalooza Effect

Munger uses the term "Lollapalooza Effect" for multiple biases, tendencies or mental models acting at the same time in the same direction. With the Lollapalooza effect, itself a mental model, the result is often extreme, due to the confluence of the mental models, biases or tendencies acting together. During a talk at Harvard in 1995, Munger mentions Tupperware parties and open outcry auctions, which turn the human brain into "mush". In the Tupperware party, you have reciprocation and social proof. (The hostess gave the party and the tendency is to reciprocate; other people are buying, which is the social proof.) In the open outcry auction, there is social proof of others bidding, commitment to buying the item, and deprivation super-reaction syndrome, i.e. sense of loss. The latter is an individual's sense of loss of what he believe should be or is his. These biases often occur at either conscious or subconscious level, and in both microeconomic and macroeconomic scale.

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