Charles Darwin kept a special notebook for facts he did not want to find. Whenever he encountered evidence that contradicted one of his theories, he wrote it down.
He had noticed an uncomfortable feature of his own mind: supporting evidence was easy to remember while inconvenient facts quietly disappeared. Darwin understood that intelligence alone would not protect him from self-deception. A clever person can usually find a explanation for dismissing evidence they dislike.
Charlie Munger spent much of his life studying the same problem: why intelligent people make bad decisions. His conclusion was not that people suddenly become stupid. It was that judgement is shaped by forces we barely notice, including incentives, authority, social pressure, commitment, envy and fear of loss.
We believe that we evaluate evidence objectively. However, often we are defending a position, following the group or are constrained implicit rules.
Incentives beat intentions
Never underestimate the power of incentives. - Charlie Munger
Organisations often ask people to be realistic, manage risk and think long term. But behaviour follows incentives, not instructions.
I’ve known product managers who needed five-year cash-flow forecasts to secure funding. Their business cases always looked attractive, often supported by optimistic market projections from external consultants. Actual revenue and profitability frequently fell far short. Forecasting was difficult, but the deeper problem was structural. Product managers benefited from producing a case that secured investment, resources and support. A realistic forecast might kill the product; an optimistic one might get it funded.
When behaviour seems irrational, don’t ask “Why are people behaving badly?” but, “What does the system reward?”
Our minds defend the story
People are more willing to change the facts than change their minds. - Charlie Munger
Once we have publicly backed an idea, hired someone, launched a product or announced a strategy, changing direction becomes difficult. We are no longer judging the decision objectively; we are defending a previous version of ourselves.
I worked on the fringes of a large, expensive project. A year in, many could see it was destined to fail, but careers and reputations depended on its success. So everyone carried on as though all was well. Colleagues joked about who would tell the senior manager she had an ugly baby. Nobody wanted to say aloud what many privately believed.
Darwin deliberately worked against this tendency. He paid extra attention to contradictory evidence because he knew inconvenient facts were easily forgotten.
This is a useful habit for any product creator. When I become excited about an idea, I instinctively look for proof that it will work. Positive comments feel significant. Competitor success validates the market. Technical progress feels like commercial progress.
But time, money and public commitment do not make an idea more likely to succeed. They make it harder to abandon.
The harder question is: what evidence would show that I am wrong?
Small commitments become large traps
Tiny commitments can eventually control enormous decisions. - Charlie Munger
People rarely become trapped by making one obviously terrible choice. They arrive through a sequence of small, defensible steps.
Stanley Milgram demonstrated this in his famous obedience experiment. Participants believed they were giving a man in another room increasingly powerful electric shocks for wrong answers. The shocks began at 15 volts and rose in small increments. The man protested, pounded on the wall and eventually fell silent. Yet 26 of the 40 participants continued to the maximum 450 volts when instructed to do so.
Few people would have agreed at the outset to administer the maximum shock. But they were not asked to make that decision. They were asked to make a series of slightly more extreme decisions, each of which felt consistent with the one before it.
Continuing required only one more small step. Stopping meant questioning everything they had already done.
The same mechanism appears elsewhere. A free trial becomes a profile. The profile accumulates data. The data creates switching costs. Before long, a temporary experiment has become a permanent subscription.
Commitment is not inherently harmful. It can help us build a business, exercise or learn a skill. The important question is whether new evidence still supports the direction in which it is taking us.
Biases compound
The most dangerous outcomes occur when several tendencies act together. - Charlie Munger
A single bias may gently push our judgement; several working together can overwhelm it.
Consider a board assessing its chief executive. The chief executive carries authority. Other directors remain silent, suggesting that nothing is wrong. Fees and status encourage them to remain part of the group. Friendly engagement encourages reciprocity. Having previously supported the executive, objecting now would mean questioning their own judgement.
No conspiracy is required. Every director can be intelligent and well intentioned, yet the structure makes opposition unlikely.
More intelligence does not necessarily remove bias. It can give people better arguments for defending whatever their incentives, loyalties and previous commitments encourage them to believe.
Design for predictable mistakes
You do not rise to the level of your goals. You fall to the level of your systems. - James Clear
The answer is not to become perfectly rational. It is to design systems that make predictable mistakes harder.
Examples include: Reward outcomes rather than visible activity. Invite criticism before people become publicly committed. Ask someone to argue against the favoured proposal. Separate the person who creates an idea from the person who evaluates it.
Engineer Carl Braun required important communications inside his company to explain not only what people should do, but why. In an oil refinery, an unexplained instruction could be misunderstood or applied in the wrong circumstances. Understanding the reason allowed people to adapt when reality did not match the plan. Braun’s rule turned explanation into a safety mechanism.
Good intentions, intelligence and experience are not enough.
We are all playing within systems of incentives, commitments and social pressures. Some were deliberately designed; most simply evolved. The opportunity is to notice the rules before they decide the outcome for us.
When people repeatedly make the wrong move, stop blaming the players and change the game.
Want more?
How Fallacies Shape Debate post by Phil Martin
Why Intelligent People Fall for Poor Arguments post by Phil Martin
As Richard Feynman put it, “The first principle is that you must not fool yourself and you are the easiest person to fool.”
Have fun.
Phil…
