Avoid 25 Serious Missteps with One Checklist

Charles T. Munger, longtime associate of Warren Buffett, has made a career of avoiding common errors in judgment. Long ago, he assembled a list of 25 tendencies that lead to what he called "psychology-based dysfunction." In other words, they are predictable traps that cause people to make bad business decisions.

Mr. Munger described each tendency in a document called The Psychology of Human Misjudgment, which is either the longest speech or the shortest book you will ever encounter.

Unfortunately, we can't live by what we can't remember. Most of us can't remember 25 ways we act dumb, ignorantly, or rashly - especially at the time we are in the midst of acting dumb, ignorantly, or rashly.

To solve that problem, I adapted the 25 tendencies into a handy checklist you can use when confronted with important decisions. It's at the bottom of this article.

In such situations, I'd suggest you go line by line through all 25 tendencies, and check whether you might - at that point in time - be guilty of such an error in judgment.

Some - but not all - of these items include an "antidote." These are steps you can take to counterbalance the negative tendency. But many have no antidote other than for you to be fully aware that, like all of us, you possess certain tendencies that can cause you to make errors in judgment.

For example, the Liking/Loving Tendency says that it is very hard for us to be objective about people whom we like or love. So you'd be wise to avoid making judgments about them, or at least to get a second opinion if you do.

The Stress Influence Tendency suggests that severe stress can lead to depression and extreme pessimism, even among people who ordinarily are not susceptible to depression. While under such stress, it would be prudent to keep in mind that your choices may not be as stark as they seem.

This link will let you save a larger PDF of the below checklist; it is much easier to read. A copy also appears in the Summary section of my LinkedIn profile.

The Psychology of Human Misjudgment explains each tendency, most in great detail.

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Bruce Kasanoff helps companies simplify their communications and strategies. He has more free tools at Kasanoff.com.