Saturday Serendipity
Quote, Mental Model, Interesting find.
Hi.
Reading time: About 6 minutes
Quote
“People are frugal in guarding their personal property; but as soon as it comes to squandering time they are most wasteful of the one thing in which it is right to be stingy.”
― Seneca, On the Shortness of Life”
Mental Model
Liking
Do you notice that whenever you have to choose a team or a group of people what type of people you choose?
In my opinion there are two criterias to take a person in my group:
I have to like working with the person
The person has to be good at that work.
If it is something I can afford to be a little chill about I give more importance to the 1st criteria. I think it is completely natural for people to want to be liked and to only be associated with the people they like.
“We are programmed by evolution to want to be liked and loved.” - Prof Sanjay Bakshi
Everyone has people they admire. It starts out when you are a child and you admire your parents, grandparents or siblings. These are the people that you look up to and love. Now what can possibly go wrong with this?
Charlie Munger answered this question in his famous talk: The Psychology of Human Misjudgement,
“One very practical consequence of liking/loving tendency is that it acts as a conditioning device that makes the liker or lover tend to 1) ignore the faults of, and comply with the wishes of, the object of his affection; 2) favor people, products, and actions merely associated with the object of his affection, as we shall see when we get to influence-from-mere-association tendency; and 3) distort other facts to facilitate love.”
When it comes to people that we like/love we do not act rationally. We ignore their faults or don’t take it the same way that we would if we disliked the person. The inverse is also true. We tend to overweigh the good things of the people we like and neglect the people that we dislike.
It does not necessarily need to be restricted to people. If I have to pick between two sports or recommend a sport to someone, no matter what the other person’s situation is I will hundred percent have a bias to cricket and recommend them to play cricket.
In everyday life we always act in a way where we want to be liked. Our actions are determined by the way that people will judge us. Very rarely do we not care about what other people think about us.
While this is a bias, here is an interesting observation. Buffett and Munger became partners only because of this. In Robert Cialdini’s book he mentions that we like people who resemble us. Buffett and Munger met at a mutual friend's party and instantly hit it off because they both thought similarly. Both of them shared ideas which were admired by the other.
Humans are evolved to behave in the following manner:
We like people who are physically attractive
We like people who are similar to us
We like people who like us (praise)
We like people who we are familiar with.
In Sport
You can think of the people that you look up to in sport. Now think of all the debates you have with your friends about who is better. More often than not you don’t even consider the negative points. If you do fair play to you. Most fans ignore the mistakes that their idols make.
As a player as well we want to imitate others so that we gain the same admiration that they have. So many people want to have the same technique as Virat Kohli but one thing is for sure every person has their own technique and to be honest it does not matter. What matters in the end is runs for a batsman. Steve Smith is an unorthodox batsman, I don’t think he plays a straight drive or cover drive like Sachin. But he has overcome wanting to be liked. He enjoys his cricket and does his job for his country. Who gives a rat’s ass about how I scored the runs. I helped my team to win. End of.
In Investing
When it comes to investing I have a controversial take here. A lot of us, including myself, admire Warren Buffett. One thing I have noticed myself falling prey to is the fact that I more or less always agree with him. After a year or so, I have found him to be right on a lot of things and this in turn has made me believe that whatever he says is going to be right. This is a liking bias.
I have not challenged his theories. I stopped asking the questions I should be. We have certain role models who we learn a lot from but we don’t acknowledge their mistakes. Warren Buffett has very few but I think he does have flaws which we can learn from.
Not saying you should hate him just saying you should question him. If he is right it won’t harm you in fact it will just improve your understanding.
When it comes to investing a lot of us have companies that we like. We might be consumers of the company or have some type of relation with it. This clouds our judgment. We might be loving the product that the company makes but that does not mean that it is a good investment.
For example, I consume Kit kat and maggi regularly but if someone asks me whether I would buy Nestle I would reply no because of it’s crazy valuations.
We have to acknowledge the companies we love may not be investments that will give returns.
Boardrooms malfunction due to the liking bias. Everyone in the boardroom agrees to the majority even if personally they know that it is bad for the company. They act against the best interest of all stakeholders because they want to be liked.
Antidote
Farnam Street wrote,
“Perhaps the right question to ask here is not “how can we avoid the bias from liking”, but when should we?
Someone who is conditioned to like the right people and pick their idols carefully can greatly benefit from these biases.”
If you do end up liking Warren Buffett because you think similarly it is a good thing. You admire the right mentors. That can be life changing. But do remember the pitfalls.
Interesting find
That’s it! Enjoy your weekend!
Thank you,
Samvit.
Well written buddy!!