I’m currently reading Poor Charlie’s Almanack. I suppose I’m attracted to Charlie because he’s somewhat less known than Warren Buffet. I’m halfway reading the book, so I’d share what I’ve learned so far.
Source: https://www.amazon.co.uk/Poor-Charlies-Almanack-Essential-Charles/dp/1953953239
Some text is hard for me to understand. I had to look back and forth to Google Translate and ChatGPT for better understanding.
Charlie uses multiple mental models to provide a context, or latticework, when dealing with situation. Mental models can come from math (compounding), engineering (breakpoints), microeconomics (advantages of scale, patents), and psychology.
Suprisingly Charlie put a special attention toward psychology, “I have fallen in love with my way of laying out psychology because it has been so useful to me”. Talk eleven is dedicated for 25 psychology models that are useful—but can also be misleading. Below are some of the models explained in the book.
1. Reward- and punishment- superresponse tendency
People behaviour influenced by reward and punishment. Faulty incentives can promote undesirable behavior, and vice versa. With incentives, a decent man can slip into immoral behavior and still find a way to justify it. For example, a salesman living on purely commission will be much harder to keep moral. But they may well be more efficent per dollar spent.
Economists call the natural result of incentive-caused bias an agency cost.
2. Liking / loving tendency
People tend to ignore the faults of, and comply with the wishes of the object of his affection.
3. Disliking / hating tendency
People tend to distort other facts to facilitate hatred toward the object of his dislike.
4. Doubt-avoidance tendency
The brain programmed to quickly remove doubt by reaching some decision. This tendency can be triggered by puzzlement and stress.
5. Inconsitency-avoidance tendency
The brain is reluctant to change, which is a form of inconsistency avoidance. This tendency makes us stick to certain habits, conclusions, and attitudes.
The implication is that when we sacrifice for something, we tend to value it more. On the other hand, when someone is manipulated into hurting another person, they tend to disapprove of that person.
Charlie’s interest toward psychology motivates me to study the topic further. My wife, a psichiatry, recommends “Bad Men Do What Good Men Dream”. It’s on my reading list.
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