And they tried moral suasion, they tried everything in the world, and finally somebody got the happy thought that they were paying the night shift by the hour, and that maybe if they paid them by the shift, the system would work better. And Federal Express had one hell of a time getting the thing to work. And the system has no integrity if the whole shift can't be done fast. The heart and soul of the integrity of the system is that all the packages have to be shifted rapidly in one central location each night. One of my favorite cases about the power of incentives is the Federal Express case. And never a year passes, but I get some surprise that pushes my limit a little farther. Well you can say, “Everybody knows that.” Well I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it.
Under recognition of the power of what psychologists call reinforcement and economists call incentives. 24 Standard Causes of Human Misjudgment.įirst. Well let me romp through as much of this list as I have time to get through. So I think the people that are working on this fringe between economics and psychology are absolutely right to be there, and I think there's been plenty wrong over the years. If you come to inconsistencies, they have to be resolved, and so if there's anything valid in psychology, economics has to recognize it, and vice versa. How could economics not be behavioral? If it isn't behavioral, what the hell is it? And I think it's fairly clear that all reality has to respect all other reality. When those holes had filled in, I thought I had a system that was a good working tool, and I'd like to share that one with you.Īnd I came here because behavioral economics. Well, it's an academic book aimed at a popular audience that filled in a lot of holes in my crude system. And he wrote this book, which has now sold 300 odd thousand copies, which is remarkable for somebody. When I saw this patterned irrationality, which was so extreme, and I had no theory or anything to deal with it, but I could see that it was extreme, and I could see that it was patterned, I just started to create my own system of psychology, partly by casual reading, but largely from personal experience, and I used that pattern to help me get through life.įairly late in life I stumbled into this book, Influence, by a psychologist named Bob Cialdini, who became a super tenured hotshot on a 2,000 person faculty at a very young age.
#X minus pro your nobody till somebody loves you full
I don't think I've created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with. I am very interested in the subject of human misjudgment, and Lord knows I've created a good bit of it.
This speech was delivered by Charlie Munger to a crowd at Harvard University in 1995.
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