Charlie Munger on Psychology and Morality

Charlie Munger in his speech on Wordly wisdom to Stanford students. He was explaining the importance of psychology and more importantly how more than one principle of psychology can interact and multiply and become a powerful force. The first thing that comes to my mind reading this is the corruption in India and how it continues.

It can’t be emphasized too much that issues of morality are deeply entwined with worldly wisdom considerations involving psychology. For example, take the issue of stealing. A very significant fraction of the people in the world will steal if (A) it’s very easy to do and (B) there’s practically no chance of being caught.

And once they start stealing, the consistency principle—which is a big part of human psychology—will soon combine with operant conditioning to make stealing habitual. So if you run a business where it’s easy to steal because of your methods, you’re working a great moral injury on the people who work for you.

Again, it’s obvious. It’s very, very important to create human systems that are hard to cheat. Otherwise, you’re running civilization because these big incentives will create incentive-caused bias and people will rationalize that bad behaviour is OK.

Then, if somebody else does it, now you’ve got at least two psychological principles: incentive0caused bias plus social proof. Not only that, but you get Serpico effects: If enough people are profiting in a general social climate of doing wrong, then they’ll turn on you and become dangerous if you try and blow the whistle.

It’s very dangerous to ignore these principles and let slop creep in. Powerful psychological forces are at work for evil.


You must stop slop early. It’s very hard to stop slop and moral failure if you let it run for a while.


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