Becoming A Better Investor: The Senescence-Misinfluence Tendency

Charlie Munger, Warren Buffett’s longtime partner and Berkshire Hathaway’s vice-chairman, often highlighted the powerful role human psychology plays in decision-making—especially in investing. He identified 25 psychological tendencies that commonly lead to poor choices.

This week, we’re diving into tendency number twenty one, the Senescence-Misinfluence Tendency, and how it can cloud investment judgment

What is it?

This tendency refers to the cognitive decline we experience as we age and how it gets difficult to learn new things.  Says Munger, “With advanced age, there comes a natural cognitive decay, differing among individuals in the earliness of its arrival and the speed of its progression.”

A simple example would be technology. Many older people struggle to adjust to and adapt new technology and tech tools. Munger warns us that as we age, our mental faculties naturally decline. But if we make an effort to keep our mind active and sharp, we can delay this mental decay.

How does it play out in the world of investing?

Our skills won’t disappear overnight. But we may experience subtle shifts, like slower processing speed, poor memory, diminished attention to detail, that can quietly erode our ability to make sound decisions. In the world of investing, where patience, rationality, and clarity matter, this decline can be costly.

So how do we guard against it?

• Recognise the issue: Ageing is a natural process. And our mind will slow down. Recognising this cognitive limitation is not a weakness, it actually works in our favour. We can structure decisions to make them less complex, revisit and write down our investment theses, and spend a little more time reflecting and weighing the pros and cons before making a big investment decision.

• Always keep learning: The best way to keep any muscle active is to exercise it,and this holds true for our mind as well! Munger said, “Continuous thinking and learning, done with joy, can somewhat help delay what is inevitable.” Engaging in activities that promote cognitive health, like bridge, puzzles and learning new skills always helps.

• Collaborate and seek input from others: It is important to seek inputs from other people as we get older. Trusted collaborators (these could be advisors, partners, or younger colleagues) can offer fresh perspectives and catch what we may miss.

Age doesn’t just reshape our bodies. It also alters how we think and make decisions. Our natural cognitive decline can subtly influence the quality of our choices, from everyday matters to investment portfolios.

But awareness is key. By understanding how age impacts decision-making, we can adopt strategies — like seeking second opinions, or building in more time to learn and reflect — that help us continue making sound investment decisions.