Thanks. I hate these pseudo-PDF, book shovelware sites that paywall/proprietarize/socalize content to be useless on readers and generally get in the way.
That's a fun read. The section on incentives is useful. But he idolizes Patterson, the National Cash Register guy? That guy was the Travis Kalanick of the late 19th century.
"Politics is the art of marshalling hatreds". Munger was way ahead of his time there.
"First-conclusion bias". Huge problem with cops.
"It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders.
"Always tell us the bad news promptly. Good news can wait" - Berkshire policy.
"A job hunter who is a marvelous 'presenter' often causes grave danger under modern executive-search practice." - referring to how Carly Fiorina tanked HP.
"An excess of optimism is the normal human condition" - cited to Demosthenes.
Didn't know that went back that far.
"Deprival Superreaction" - the asymmetry between gain and loss is well known, but not under that name.
> "First-conclusion bias". Huge problem with cops.
Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes us to believe the problem is far bigger than it actually is, probabilistically speaking: https://i.imgur.com/tOTcCRH.jpg . (Mind you, those stats are "white men", much less "white men that happen to be policemen") .
Dramatic/emotional information is somehow perceived to be a bigger threat than "real, actual statistcal risk", in other words.
It is a fairly common subterfuge to replace law-enforcement killing blacks statistics with statistics of white-on-black crime. There have been several studies that demonstrate that the likelihood of death from an LEO encounter increases with your melanin content http://www.independent.co.uk/news/world/americas/black-ameri...
http://killedbypolice.net/ tracks those; I don't think they have statistics per race, but even if all the people killed were black, I don't think it would change much the graphic.
More than 1000 people killed by cops per year is still absolutely horrifying, of course.
I would say you are much less likely to be shot (by anybody) in Germany. Far fewer people carry guns. (Making up numbers for illustration purposes only: In the US, you may be twice as likely to have a physical confrontation with fists, and 50 times as likely to be shot.)
This changes things for the police. If a cop in Germany confronts a belligerent citizen, said citizen may take a punch at the cop. The cop is probably better trained, and also probably in better shape. Still, s/he could lose. If so, s/he may get teased by other cops back the station.
In the US, the cop has to worry about the belligerent citizen taking a shot at the cop. If the cop loses that encounter, the other cops at the station will speak very respectfully to the cop's widow(er). That's a completely different proposition. It means that the US cops are on a hyper hair-trigger alert that German cops don't have to be.
Disclaimer: I don't work in law enforcement. It's been many years since I was in Germany. This is my perception only.
Munger's an adherent of a particular value system common among businessmen from the mid-19th -> late-20th century. In this value system, 1) the primary purpose of economic activity is efficiency, producing more with less 2) the purpose of employees is to serve as instruments for their employers to accomplish their business goals and 3) anything that gets in the way of this is by definition evil, and it is not immoral to work around such restrictions for the purposes of increasing efficiency.
Both Patterson and Travis Kalanick are exceptionally virtuous men by this value system. They were ruthless drivers of efficiency, willing to ignore any obstacles in the pursuit of making their businesses bigger and more profitable. Other adherents to this value system include Milton Friedman, Ayn Rand, Bill Gates, John D. Rockefeller, J.P. Morgan, Steve Jobs, and Paul Graham.
By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and those who break those rules are by definition evil and 4) the employee/employer relationship should be a partnership where the employer should provide purpose and direction in accord with the employee's value system, and in return the employee helps the employer accomplish their business goals. Interestingly, both the Left and the Right of an increasingly divided America subscribe to this value system, they just define "self fulfillment and emotional gratification" differently.
The two value systems aren't entirely at odds with each other, but they aim toward entirely different purposes, and so naturally they conflict at several points. When this happens, things that may be considered the height of virtue under one value system are morally abhorrent to another one.
> By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and those who break those rules are by definition evil and 4) the employee/employer relationship should be a partnership where the employer should provide purpose and direction in accord with the employee's value system, and in return the employee helps the employer accomplish their business goals. Interestingly, both the Left and the Right of an increasingly divided America subscribe to this value system, they just define "self fulfillment and emotional gratification" differently.
Wow, you are a whole lot less cynical than I am, because when I look at American businesses, the operation of the hyper-growth mindset in practice, and the consequences of policies and practices that assume sustained exponential growth, I don't see these values reflecting back.
I think when you look at consumer habits (summed up in household debt, https://en.wikipedia.org/wiki/Household_debt), there is an undertone of overconsumption that runs in parallel with the hypergrowth mindset. Consumption hasn't slowed down, while wages have. Household debt and national debt follow scarily similar arcs.
They don't, because the purpose of capitalism is to exponentially increase profits. Even if you want to give employees more money so they can buy the products they make and strengthen the economy that enables your corporation, at some point the true purpose of capitalism (ABC - always be capitalizin') will reach a point where all the money is either held by the corporation or the employees, and the only way to increase profits is to take it from the employees. Which is why employee pay stagnates while corporate profits zoom sky high.
Corporations do not value employees any more than the man turning a crank values the cogs.
> They don't, because the purpose of capitalism is to exponentially increase profits.
The purpose of Capitalism is free-association based capital allocation for generating a profit, not to exponentially increase profit. There is no arbitrary outsized multiplication definition attached, nor is there an arbitrary small level of profit under which it's no longer considered Capitalism.
Costco and Walmart are blatantly Capitalist entities, they operate with minuscule 2-3% net income margins.
> they operate with minuscule 2-3% net income margins
Which isn't evidence of the aforementioned point. I'll grant you "exponential" isn't mathematically correct - it's more a turn of phrase. But the profit margins here are strategic.
Costco's gross income per square foot is much higher than Walmart's while their margin is half that of Walmart's. Costco is more valuable, and makes less profit. This is because Costco's aim is to provide the best value for its members [whom usually have more disposable income]. It does this by jockeying for the best bulk price, increasing efficiency, and providing good pay and benefits to its workers. Costco is a shining example of the idea of the corporation being a partner with the employees.
Walmart's aim is to control markets, and does so by eliminating the potential for price competition and then using its buying power to force sellers to bow to its whims. Costco could make much more profit by treating its workers the way Walmart does, but chooses not to, because its value proposition is different.
Costco will also probably not be able to compete for long, not because it isn't valued well, but because Amazon and Walmart will eventually take over every remaining obstacle to the consumer's wallet. Walmart is also slowly increasing its revenue per square foot so it doesn't have to keep fighting a losing battle online.
> By contrast, the dominant value system in America today
There isn't really one dominant one, but none of those anywhere near that mark are even remotely like your description.
You seem to have confused the fact that several different value systems share a limited tolerance for value systems with differing life goals with them all being a single value system with a highly subjective life goal as a central plank.
Such a value system exists, too, but is by no means dominant.
It's not so much a difference in values as a conflict in interests. Everyone wants to maximize happiness for themselves, which often include maximizing financial status. Thus, those "values" are really just a way to justify their personal interests. Of course, there are people, especially in the middle and lower class, who are foolish enough to place "fairness" and "what's right" over their own personal interests.
> "It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders.
You might be over-reading that. Getting ahead relative to others doesn't require explicitly pushing someone else down. If you work on your own and indirectly push everyone else down by inflating whatever metric you measure success by.
A clear example is that modern poor people are far richer than the richest people thousands of years ago. They have fridges and cars, or at least less disease. All those historical people are losers because we won but that's not a bad thing. In absolute terms, we didn't change their status at all.
This might work across the broad economic spectrum. But locally as things apply to you, for one person to succeed others absolutely have to lose. Promotions, college admissions, job interviews all work that way.
So as long as you are a participant to the social code, the society is essentially a giant stack ranking system, where rewards flow in per your rank in ascending order.
Which contains that speech and other talks that he has given over the years. It's a beautifully illustrated book chock full of his witticisms. I enjoyed it tremendously. Also check out "Seeking Wisdom" (from the same publisher and website). The book was listed as a favorite of Nassim Taleb (whom I am also a fan of). It's one of my favorite books, personally.
> ordinarily when you try to use your knowledge of psychological tendencies in the artful manipulation of someone whose trust you need, you will be making both a moral and prudential error. The moral error is obvious. The prudential error comes because many intelligent people, targeted for conscious manipulation are likely to figure out what you are trying to do and resent your action.
Seems to me then the obvious moral error extends to less intelligent (so regarded) individuals and to groups of individuals of all stripes. Which presumably means Mr Munger has never utilised the methods he has researched so digligently.
"As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort."
Is he talking about conceptual understanding vs rote memorization? What theory is he talking about?
37 comments
[ 3.6 ms ] story [ 87.4 ms ] threadhttp://tarangshah.com/to-read/MungerMisjudgement.html
I got it from the comments!
The article is worth reading for this alone.
"Politics is the art of marshalling hatreds". Munger was way ahead of his time there.
"First-conclusion bias". Huge problem with cops.
"It is not greed that drives the world, but envy" - cited to Warren Buffett. Hmm. He probably ran into too many business types with the mindset "It's not enough to win; someone else has to lose." Such ego trips are not useful to the stockholders.
"Always tell us the bad news promptly. Good news can wait" - Berkshire policy.
"A job hunter who is a marvelous 'presenter' often causes grave danger under modern executive-search practice." - referring to how Carly Fiorina tanked HP.
"An excess of optimism is the normal human condition" - cited to Demosthenes. Didn't know that went back that far.
"Deprival Superreaction" - the asymmetry between gain and loss is well known, but not under that name.
Also check out "availability bias" which Charlie mentions many times in his speeches. Because "x minority shot and killed by police" comes up so many times in the news, this image tends to be readily accesible in our brains when we here the word "cops", thus causing us to vastly overestimte it's probabiltiy of this event actually happening in real life. This causes us to believe the problem is far bigger than it actually is, probabilistically speaking: https://i.imgur.com/tOTcCRH.jpg . (Mind you, those stats are "white men", much less "white men that happen to be policemen") .
Dramatic/emotional information is somehow perceived to be a bigger threat than "real, actual statistcal risk", in other words.
Daniel Kahneman also covers this topic on his excellent "Thinking Fast and Slow": https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow#Availa... which I also recommend.
These stats are on murders as tracked by law enforcement agencies, most of the killing of black people by police officers wouldn't be included.
More than 1000 people killed by cops per year is still absolutely horrifying, of course.
Is the US 40 to 100 times more dangerous than Germany? You tell me, I've never been there.
(Germany is just an example. The UK, Canada, Austria, and probably many other countries in the EU all kill less than 10 people per year).
This changes things for the police. If a cop in Germany confronts a belligerent citizen, said citizen may take a punch at the cop. The cop is probably better trained, and also probably in better shape. Still, s/he could lose. If so, s/he may get teased by other cops back the station.
In the US, the cop has to worry about the belligerent citizen taking a shot at the cop. If the cop loses that encounter, the other cops at the station will speak very respectfully to the cop's widow(er). That's a completely different proposition. It means that the US cops are on a hyper hair-trigger alert that German cops don't have to be.
Disclaimer: I don't work in law enforcement. It's been many years since I was in Germany. This is my perception only.
Both Patterson and Travis Kalanick are exceptionally virtuous men by this value system. They were ruthless drivers of efficiency, willing to ignore any obstacles in the pursuit of making their businesses bigger and more profitable. Other adherents to this value system include Milton Friedman, Ayn Rand, Bill Gates, John D. Rockefeller, J.P. Morgan, Steve Jobs, and Paul Graham.
By contrast, the dominant value system in America today is marked by different tenets: 1) the primary purpose of life - of which economic activity is only one facet - is self-fulfillment and emotional gratification 2) it is virtuous to pursue such goals for yourself as long as you don't interfere with other peoples' pursuit of such goals 3) rules and regulations exist to enforce #2 on behalf of the powerless, and those who break those rules are by definition evil and 4) the employee/employer relationship should be a partnership where the employer should provide purpose and direction in accord with the employee's value system, and in return the employee helps the employer accomplish their business goals. Interestingly, both the Left and the Right of an increasingly divided America subscribe to this value system, they just define "self fulfillment and emotional gratification" differently.
The two value systems aren't entirely at odds with each other, but they aim toward entirely different purposes, and so naturally they conflict at several points. When this happens, things that may be considered the height of virtue under one value system are morally abhorrent to another one.
Wow, you are a whole lot less cynical than I am, because when I look at American businesses, the operation of the hyper-growth mindset in practice, and the consequences of policies and practices that assume sustained exponential growth, I don't see these values reflecting back.
Corporations do not value employees any more than the man turning a crank values the cogs.
The purpose of Capitalism is free-association based capital allocation for generating a profit, not to exponentially increase profit. There is no arbitrary outsized multiplication definition attached, nor is there an arbitrary small level of profit under which it's no longer considered Capitalism.
Costco and Walmart are blatantly Capitalist entities, they operate with minuscule 2-3% net income margins.
Which isn't evidence of the aforementioned point. I'll grant you "exponential" isn't mathematically correct - it's more a turn of phrase. But the profit margins here are strategic.
Costco's gross income per square foot is much higher than Walmart's while their margin is half that of Walmart's. Costco is more valuable, and makes less profit. This is because Costco's aim is to provide the best value for its members [whom usually have more disposable income]. It does this by jockeying for the best bulk price, increasing efficiency, and providing good pay and benefits to its workers. Costco is a shining example of the idea of the corporation being a partner with the employees.
Walmart's aim is to control markets, and does so by eliminating the potential for price competition and then using its buying power to force sellers to bow to its whims. Costco could make much more profit by treating its workers the way Walmart does, but chooses not to, because its value proposition is different.
Costco will also probably not be able to compete for long, not because it isn't valued well, but because Amazon and Walmart will eventually take over every remaining obstacle to the consumer's wallet. Walmart is also slowly increasing its revenue per square foot so it doesn't have to keep fighting a losing battle online.
Certainly not. You described the value system dominant in many European countries, but certainly not the one in the USA.
There isn't really one dominant one, but none of those anywhere near that mark are even remotely like your description.
You seem to have confused the fact that several different value systems share a limited tolerance for value systems with differing life goals with them all being a single value system with a highly subjective life goal as a central plank.
Such a value system exists, too, but is by no means dominant.
You might be over-reading that. Getting ahead relative to others doesn't require explicitly pushing someone else down. If you work on your own and indirectly push everyone else down by inflating whatever metric you measure success by.
A clear example is that modern poor people are far richer than the richest people thousands of years ago. They have fridges and cars, or at least less disease. All those historical people are losers because we won but that's not a bad thing. In absolute terms, we didn't change their status at all.
This might work across the broad economic spectrum. But locally as things apply to you, for one person to succeed others absolutely have to lose. Promotions, college admissions, job interviews all work that way.
So as long as you are a participant to the social code, the society is essentially a giant stack ranking system, where rewards flow in per your rank in ascending order.
Which contains that speech and other talks that he has given over the years. It's a beautifully illustrated book chock full of his witticisms. I enjoyed it tremendously. Also check out "Seeking Wisdom" (from the same publisher and website). The book was listed as a favorite of Nassim Taleb (whom I am also a fan of). It's one of my favorite books, personally.
Seems to me then the obvious moral error extends to less intelligent (so regarded) individuals and to groups of individuals of all stripes. Which presumably means Mr Munger has never utilised the methods he has researched so digligently.
https://news.ycombinator.com/item?id=12159242
"As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort."
Is he talking about conceptual understanding vs rote memorization? What theory is he talking about?