Two-Track Analysis: Examine both rational factors and psychological biases when making decisions. Munger identified 25 tendencies that distort our thinking.
How do you make better decisions? Charlie Munger uses what he calls "two-track analysis."
The first track is rationality: what do the facts say? You work out the problem like an engineer: calculating actual probabilities and weighing the evidence objectively.
The second track is psychology: what biases might be distorting your judgment? Munger identifies the subconscious influences where the brain automatically does things that are generally useful but often malfunction.
Munger identified 25 tendencies that he used as a checklist when making decisions:
- Reward- and punishment-superresponse tendency
- Liking/loving tendency
- Disliking/hating tendency
- Doubt-avoidance tendency
- Inconsistency-avoidance tendency
- Curiosity tendency
- Kantian fairness tendency
- Envy/jealousy tendency
- Reciprocation tendency
- Influence-from-mere-association tendency
- Simple, pain-avoiding psychological denial
- Excessive self-regard tendency
- Overoptimism tendency
- Deprival-superreaction tendency
- Social-proof tendency
- Contrast-misreaction tendency
- Stress-influence tendency
- Availability-misweighing tendency
- Use-it-or-lose-it tendency
- Drug-misinfluence tendency
- Senescence-misinfluence tendency
- Authority-misinfluence tendency
- Twaddle tendency
- Reason-respecting tendency
- Lollapalooza tendency
You can read more details on each tendency here: Talk Eleven.