Author Topic: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)  (Read 9194 times)

Gregmal

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #20 on: November 19, 2020, 03:02:05 PM »
Ideology is what you allow it to be, and in many ways its what you want it to be. For all the negative connotations, theres people in cults like Alcoholics Anonymous adhering to rhetoric that has legitimately saved their lives. Same is true for religion. Of course there are darker sides and uses, but thats true for everything.


cherzeca

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #21 on: November 19, 2020, 04:48:38 PM »
ideologies help one believe that one's success is something one has earned and is entitled to, and one's failures are a result of fate or forces beyond one's control.  filters and rules pretty much do the same thing.  if you choose and practice your ideology well, it can be hugely rewarding. I think one of the most ideological investors is Buffett.   

rb

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #22 on: November 19, 2020, 05:22:24 PM »

2020 has been an amazing year of learning.  The Ideology bias was very apparent this year where people's extreme ideologies prevented them from seeing the truth on many issues.
I personally think these ideologies turn people's brains into BOILED CABBAGE.
All one has to do is look at the history of collective ideologies and see the extreme damage that can result.  Communism comes to mind.
While I agree with most of you just said. I think you picked the wrong example at the end with communism. While communism is certainly an ideology, there were very few communist ideologues during communism.

I am not sure of the percentage of people in favor of communism prior to countries becoming communists.   But I suspect it was quite high as it was sold and seemed to offer
the masses something and that is why so many fought for it.   I think it is a great example of the danger of an extreme ideology. 

I think it was a disaster for a host of reasons resulting in millions of deaths, poverty, loss of freedom, etc.
I agree it was a bad system but you suspicion is incorrect.

Communism's spread in Europe for example was done through military conquest. The United States gave (gifted?) half of Europe to the USSR. At that point the countries had two choices: they could become communist or Russian tanks would roll into their countries and become communists. The second choice is actually a bit dramatic as at the point these countries became communist the USSR actually had armies stationed in these countries and the controlled the governments. They merely appointed the communist party as the ruling party.

It's pretty obvious that when you have to use a gun to get people to do something it is because they're not convinced by your ideas.

You are right that many countries in Europe became communist through military conquest.  Good point.

But then there was Russia, China, Vietnam, North Korea and Cuba.   Likely a bigger percent of the population believed Communism would be better in those countries. 
Would have been better for the populations if the leaders just threw out the Communist ideology and picked the system that worked the best.
Ok, let dig deeper. Russia and Cuba were revolutions. In these cases you are probably right that communism was accepted by a large part of the population. Though I doubt it was really the ideology of communism that did it. These revolutions were brought upon by extreme inequality. Most of the population was living at or below subsistence level. So you have a large mass of population with nothing to loose. If it wasn't communism it would probably have been some other ideology that would have done it.

This brings me back to the theory overplayed on ideology issue. Communism as an ideology was not crafted for agrarian societies like Russia and Cuba. It was crafted for industrialized societies like Germany and Britain. But in Russia Lenin and the gang decided to toss that out take the kernel of ideology and overlay a new theory on it to make it work there. So it's not so much the ideology but the theories that go with it.

Now past that it all changes. One mistake that people in the west made about communism is that it was the ideology and communists were ideologues ready to die for communism. That couldn't be farther from the truth. Was Lenin an ideologue? Probably. But not in the ideology of communism but in his own theory of communism. Past that come the next generations. Was Stalin a communist ideologue? Not for a second. He was a power hungry tyrant. As a power hungry tyrant communist Russia had a pretty good system set up to achieve his goals. Why would he want to change it?

I have to admit that I don't know as much about Asian communism as the European one. In China I know the communists fought a civil war and they won so communism it is. If you fight a civil war you don't have that great of an acceptance of an idea. But clearly enough of one for people to fight and die for the idea. Korea, again pretty big war so not overwhelming acceptance there either. Vietnam is tricky because you have so many moving parts: French imperialism, Russian influence, American interests so I'm not even gonna try to venture a guess.

In the end it ironically looks like the only place where communism ideology succeeded and was really supported by a large part of the population ideologically was Cuba. But this wasn't really communist ideology that was supported. It was Castro's version of communism. His theory basically. I think there's a fair chance that the people that came up with the communist ideology did not even know that Cuba existed.

samwise

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #23 on: November 19, 2020, 10:20:05 PM »
I wrote a bigger post on theories layered on ideologies. Munger's friend was anchored to asset value discounts which was a theory. Nothing prevented him from investing in discounted intangible assets before his "change". I'm sure Coke, P&G and Wrigley traded at discount before the 1980s as well. Similarly I am sure there are better ways to do value today than cigar butts and GARP. The ideology is intact but you must always evolve and be flexible about theory/implementation.

Yes I think thatís a good way to frame it: the idea itself may be valid, but there may be limits to how far you can take it. Reminds me of the quote by Ben Graham. You can get in more trouble with a good idea because you forget that the good idea has limits.

Russian communism could be thought of as an example of this. If you see a system with one Tsar and everyone else a serf, itís easy to get a good idea that more equity would be better. One can take that idea too far. There is probably a balance and an optimal level of inequality and opportunity.

  Change is required always.

I disagree if you are talking about value investing theories and practices. Change is required periodically maybe, but not always. If it were always required the framework would be useless since you would be reevaluating it everyday, instead of using it for evaluating companies.



And i wonder if having a punchcard (few decisions over a relatively long period for truly good ideas) "ideology" helps to adjust to blind spots. i'm not sure. At least it may help to resist the temptation to go after what's been recently popular?

The punchcard approach works when searching for competitively advantaged growth companies. There arenít as many as reading VIC would lead you to believe. Graham and Schloss didnít use that approach. It doesnít work for cigarbutt investing ( yes, pun intended)

LongHaul

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #24 on: November 20, 2020, 10:04:49 AM »
At the end of the day I think the big picture point is to not be so sure that one is right that one cannot even listen or consider evidence that is different.
I think Munger said something about putting it in percentages - For example - I think I am 80% sure of this vs acting like one is 100% sure.
 


cherzeca

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #25 on: November 20, 2020, 10:56:15 AM »
At the end of the day I think the big picture point is to not be so sure that one is right that one cannot even listen or consider evidence that is different.
I think Munger said something about putting it in percentages - For example - I think I am 80% sure of this vs acting like one is 100% sure.

I agree with this, but consider its effect on conviction.  ideologies support conviction.  If I am always questioning, then I may never get to "pulling the trigger" on an investment...I may always be some % below "trigger pulling" threshold.  now some would argue that is good, that it is good to have a punchcard and say no a lot, and swing only at fat pitches.  but I think our mental maps are such that if you are always questioning then you wont recognize the fat pitch as such.  if on the other hand I have an ideology (set of investing filters and rules) that I can fit a prospective investment into, then the trigger pulling threshold is lowered in effect.  again, I see Buffett as being a master ideologue. he waits for investment opportunities to call him, which right there is a huge ideological filter.  he has hurdles and filters that eliminate many opportunities. but when an investment opportunity comes to him that satisfies his filter framework, he is very capable of pulling trigger.  one of his most prominent filters is deal terms.  the OXY investment was made not because he understands oil and gas, but because the preferred terms were so favorable. so while I understand the term has a lot of baggage, I think we investors all have ideologies that we work from, otherwise investing would be a cacophony of potential targets...which it is for most people, who haven't developed their investing ideology into a workable framework, which is why indexing makes so much sense for most people

rb

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #26 on: November 20, 2020, 12:23:52 PM »
  Change is required always.

I disagree if you are talking about value investing theories and practices. Change is required periodically maybe, but not always. If it were always required the framework would be useless since you would be reevaluating it everyday, instead of using it for evaluating companies.
I was referring to change from a continuous improvement stand point. Not changing the current framework but constantly trying to develop other frameworks. Adding arrows to your quiver so to speak.

The business world is continuously changing as investors we have to adapt.

DooDiligence

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #27 on: November 20, 2020, 03:00:56 PM »
  Change is required always.

I disagree if you are talking about value investing theories and practices. Change is required periodically maybe, but not always. If it were always required the framework would be useless since you would be reevaluating it everyday, instead of using it for evaluating companies.
I was referring to change from a continuous improvement stand point. Not changing the current framework but constantly trying to develop other frameworks. Adding arrows to your quiver so to speak.

The business world is continuously changing as investors we have to adapt.

Change frequently makes us uncomfortable,
but it's happening to everything,
every single moment.

That's the only thing that will never change.
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SharperDingaan

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Re: Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)
« Reply #28 on: November 20, 2020, 03:32:41 PM »
Just for a twist .....
There is little difference between an ideology and a computer algorithm - the algorithm just codes it as a set of instructions, and executes it faster, consistently, and more reliably. In the crypto world the ideologue is a Decentralized Autonomous Organization (DAO), or basically a robot! https://www.investopedia.com/tech/what-dao/

Love algo's ;) they go reliably batshit when you 'gas' them with tainted data.
Same thing happens with the people version - a little wind up, and watch them go!

SD