Wouldn’t we all like to make business decisions that work as well as the world’s richest man’s?
A friendly reader noted my recent post on Irrational Economics and flagged a Marc Andreessen’s discussion of a speech by Charlie Munger, Warren Buffett’s right-hand man. The speech is The Psychology of Human Misjudgment (HTML version PDF version ). It looks at 25 things Munger thinks cause people to make bad decisions. Andreessen adapts these points for entrepreneurs, calling it in his post The Psychology of Entrepreneurial Misjudgment.
Andreessen’s post looks through the first six of the 25 flaws. It is a lengthy post, but interesting. Andreessen discusses things like the power of incentives, and the peril of not planning them carefully (biggest danger: humans are excellent at gaming systems). He looks at the danger of being liked (”if everyone agrees right up front that whatever you are doing makes total sense, it probably isn’t a new and radical enough idea to justify a new company,” he writes). And he takes on four more points.
My reader is most intrigued that behavioral psychology seems to be all the buzz in business right now. He is reading Michael Shermer’s “The Mind and the Market,” I blogged about Dan Ariely, Andreessen is blogging about — and adding variations to — Munger. Asks my reader: “Have I been asleep on this whole behavioral psychology bit or is it suddenly reaching a tipping point in awareness and publicity?”
The research has been there for decades — Gary Becker, Daniel Kahneman, Vernon Smith all come to mind. But maybe the broader business world is now figuring out how to apply these ideas. It’s a knowledge economy, after all. Maybe the recent business obsession with quants is giving way to something new (shall we call it behavior modding?)
What do you think?
