Collection: Charlie Munger - #78 'Bias From Contrast'


Video Link: https://youtu.be/3LbrzHgm7sc


In this episode, Charlie Munger shared the ninth causes of human misjudgment, bias from contrast caused distortions of sensation, perception, and cognition.


In this episode, you’ll learn:

  • What is bias from contrast?

  • How bias from contrast affect our lives unknowingly?

To check out all Collection: Charlie Munger <click here>

[Transcript]

CHARLIE MUNGER 00:08

Nine. Bias from contrast caused distortions of sensation, perception, and cognition. Here the great experiment that Cialdini does in his class is he takes three buckets of water. One’s hot, one’s cold, and one’s room temperature. And he has the student stick his left hand in the hot water and his right hand in the cold water. Then he has them remove the hands and put them both in the room temperature bucket, and of course with both hands in the same bucket of water, one seems hot, and the other seems cold because the sensation apparatus of man is over-influenced by contrast. It has no absolute scale. It’s got a contrast scale in it, and it’s scale with quantum effects in it, too. It takes a certain percentage change before it’s noticed.


Maybe you’ve had a magician remove your watch, I certainly have, without your noticing it. It’s the same thing. He’s taking advantage of your contrast type troubles and your sensory apparatus. But here the great truth is that cognition mimics sensation, and the cognition manipulators mimic the watch-removing magician. In other words, people are manipulating you all day long on this contrast phenomenon.


Cialdini cites the case of the real estate broker. You’ve got the rube that’s been transferred into your town, and the first thing you do is you take the rube out to two of the most awful over-priced houses you’ve ever seen, and then you take the rube to some moderately over-priced house and then you stick ’em. And it works pretty well, which is why the real estate salesmen do it. It’s always gonna work.


And the accidents of life can do this to you, and it can ruin your life. In my generation when women lived at home until they got married, I saw some perfectly terrible marriages made by highly desirable women because they lived in terrible homes. And I’ve seen some terrible second marriages, which were made because they were slight improvements over an even worse first marriage.


You think you’re immune from these things, and you laugh, and I wanna tell you you aren’t. My favorite analogy, I can’t vouch for the accuracy of. I have this worthless friend I like to Bridge with, and he’s a total intellectual amateur that lives on inherited money. But he told me once something I really enjoyed hearing. He said, “Charlie,” he says, “If you throw a frog into very hot water, the frog will jump out. But if you put the frog in room temperature water and just slowly heat the water up, the frog will die there.”


Now I don’t know whether that’s true about a frog, but it’s sure as hell true about many of the businessmen I know, and there again, it is the contrast phenomenon.


These are hot-shot high-powered people. These are not fools. If it comes to you in small pieces, you’re likely to miss, so you have to … if you’re gonna be a person of good judgment, you have to do something about this warp in your head where it’s so misleading by mere contrast.

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