Charlie Munger, Vice Chairman of Berkshire Hathaway and a legendary investor and businessman, has a list of 25 psychological tendencies that influence the way we think and make decisions. These tendencies, outlined in his book Poor Charlie’s Almanac, are useful in the world of investing: recognising and understanding these biases can help us avoid mistakes and become smarter, more rational investors.
This week, we’re analysing the sixth tendency, The Curiosity Tendency.
What is it?
Munger says that humans have an innate sense of curiosity, the strongest and most pronounced amongst mammals. Munger felt that curiosity, when nurtured with a good education, plays a key role in guarding us against the negative consequences that may arise from the other psychological tendencies. For example, the desire to learn and explore can open up our minds (and our investment portfolio!), help us get rid of fixed beliefs, and counter the Inconsistency/Avoidance Tendency.
How does this tendency play out in the world of investing?
In the world of investing, curiosity works in our favour. The genuine desire to learn more about the world is one of the most valuable traits we can have as investors. The Curiosity Tendency keeps us open, flexible, and constantly learning, which are essential qualities in the ever-evolving landscape of investing.
When we’re curious, we look beyond the headlines and hype and look at the fundamentals of a company, because we want to move beyond surface-level information. Instead of following a trend, we want to know why it is unfolding, or look for contrarian views. Curiosity allows us to look at a company in-depth: reading annual reports, researching the company from different angles, learning about the sector and competitors.
Investors can sometimes fall into the trap of sticking with what is familiar and rely on tropes and fads. But markets keep evolving: consumer behaviour can change, and geopolitics and technology can cause disruptions. Curiosity is
what pushes investors away from complacency and teaches how to be adaptable.
So we should use curiosity well and make it work in our favour. We should be eager to explore and learn more, but avoid making impulsive decisions with anything new we have gleaned. The key, as Charlie Munger says, is to direct our curiosity well and be disciplined and patient. In a world where so many people chase shortcuts and quick wins, Charlie Munger’s Curiosity Tendency is a reminder that long-term success comes to those who are willing to think deeply, learn broadly, and stay endlessly curious.
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