Seeking Wisdom: From Darwin to Munger
(Image: Zen Buddha Silence by Marilyn Barbone.)
October 9, 2016
I recently read Seeking Wisdom: From Darwin to Munger, a wonderful book about worldly wisdom by Peter Bevelin.
There are at least two very good ways for people to slowly acquire wisdom and knowledge over time:
- Seek to master the best of what other people have already figured out;
- Seek to emulate the scientific methods of great scientists such as Charles Darwin.
We know that our System 1 (intuition) often errors when it comes to forming and testing hypotheses. System 1 always forms a coherent story (including causality), irrespective of whether there are truly any logical connections at all among various things in experience. Moreover, when System 1 is facing a hypothesis, it automatically looks for confirming evidence.
But even System 2 – the logical and mathematical system we possess and can develop – by nature uses a positive test strategy, according to Daniel Kahneman (page 81, Thinking, Fast and Slow):
A deliberate search for confirming evidence, known as positive test strategy, is also how System 2 tests a hypothesis. Contrary to the rules of philosophers of science, who advise testing hypotheses by trying to refute them, people (and scientists, quite often) seek data that are likely to be compatible with the beliefs they currently hold.
Thus, the habit of always looking for disconfirming evidence of our hypotheses – especially our "best-loved hypotheses" – is arguably the most important intellectual habit we could develop in the never-ending search for wisdom and knowledge.
Charles Darwin is a wonderful model in this regard. Darwin was far from being a genius in terms of IQ. Yet Darwin trained himself always to search for facts and evidence that would contradict his hypotheses. Charlie Munger explains in "The Psychology of Human Misjudgment" (see Poor Charlie's Alamanack: The Wit and Wisdom of Charles T. Munger, expanded 3rd edition):
One of the most successful users of an antidote to first conclusion bias was Charles Darwin. He trained himself, early, to intensively consider any evidence tending to disconfirm any hypothesis of his, more so if he thought his hypothesis was a particularly good one...He provides a great example of psychological insight correctly used to advance some of the finest mental work ever done.
Extra material that used to be in the introduction to Think Twice.
Humans have a very strong tendency to be overconfident, especially when it comes to probabilistic decisions about the future. Overconfidence is a default mental setting.
Even being exceedingly well aware of overconfidence does not mean that one can automatically avoid it. Few people are more aware of overconfidence than Nobel Laureate Daniel Kahneman, who has studied cognitive biases for decades. Yet Kahneman admits that his default mental setting is "wildly overconfident."
Another expert on cognitive biases is Charlie Munger, as demonstrated in "The Psychology of Misjudgment." (See Poor Charlie's Almanack, Expanded Third Edition.) Munger also points out that knowing the cognitive biases does not at all mean that one can overcome them in one's own decision-making. Munger argues that it's essential to develop a system in order to be able to consistently overcome cognitive biases.
Kahneman and Munger are two of the best sources for learning about cognitive biases.
- My list of cognitive biases:https://boolefund.com/cognitive-biases/
- Munger's (more comprehensive) list:https://boolefund.com/the-psychology-of-misjudgment/
In addition to Kahneman and Munger, there are many experts in psychology and decision-making. I've written about a few:
- Richard Thaler, who wrote an excellent book, Misbehaving: The Making of Behavioral Economics (W. W. Norton, 2015): https://boolefund.com/the-making-of-behavioral-economics/
- Howard Marks, a great value investor and the author of The Most Important Thing: https://boolefund.com/howard-marks-the-most-important-thing/
There are many others I could mention, but two great researchers who have written quite a bit about psychology, decision-making, and value investing are:
- James Montier, who has written Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance (Wiley, 2007), a treasure trove of insight into decision-making and value investing. Montier also wrote Value Investing: Tools and Techniques for Intelligent Investment (Wiley, 2009).
- Michael Mauboussin has written several books, including More Than You Know: Finding Financial Wisdom in Unconventional Places (Columbia University Press, 2013), Think Twice: Harnessing the Power of Counterintuition (Harvard Business Review Press, 2012), and The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (Harvard Business Review Press, 2012).
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If you are interested in finding out more, please e-mail me or leave a comment.
My e-mail: jb@boolefund.com
Disclosures: Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Boole Capital, LLC.
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