Becoming a Better Investor: The Disliking/Hating Tendency

Legendary investor Charlie Munger, in his book Poor Charlie’s Almanack, highlights 25 key psychological tendencies that influence the way we think and make decisions, which can be applied to both life and investing. When we recognise these latent biases, we can avoid poor decisions and become smarter, more rational investors.

This week, we’re analysing the third tendency out of the twenty five, the Disliking/Hating Tendency, through the lens of investing.

What is it?

Similar to the Liking/Loving tendency, Charlie Munger believes that humans have an inborn tendency to dislike and hate people, things, institutions, etc. Munger claims that some dislikes can never go away completely, even with time. He explains this with the example of sibling rivalry and family feuds, where one sibling who hates another may engage in endless litigation simply because he or she can.

Munger says, “Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to (1) ignore virtues in the object of dislike, (2) dislike people, products, and actions merely associated with the object of his dislike, and (3) distort other facts to facilitate hatred.”

Strong negative feelings toward a person, company, or idea can cloud our judgment and lead to irrational decisions. In the world of investing, this bias can be particularly dangerous. It is the opposite of the liking/loving tendency, which is tendency number 2. So even if fact and data tell us otherwise, we are just not willing to see the goodness or value in the object of our dislike. In fact, we may even start distorting facts to fuel further negativity and/or dislike, and this can have negative effects in the long-tun

How does this tendency play out in the world of investing?

Charlie Munger’s Disliking/Hating Tendency highlights how our negative biases can cloud judgment, especially in investing. When we strongly dislike a person, company, idea, or sector, we tend to ignore their positive qualities and/or strong fundamentals. And this in turn, can make us overlook profitable investments and dismiss valuable opportunities simply because we dislike a CEO, a brand, or an industry.

For example, someone who dislikes Elon Musk and his politics might refuse to invest in Tesla, even if the company’s financials and growth potential are strong. Similarly, an investor who holds a negative view of a particular industry or has ethical concerns with it — like oil and gas or cryptocurrency — might overlook profitable opportunities within those sectors, letting personal bias override the facts.

To counter this bias, Munger emphasises the following:

Be objective:  Instead of letting our dislikes dictate investment decisions, we should focus on facts, data, and long-term value. A grudge shouldn't be the reason we miss out on a great opportunity!

Be logical: Just like we would seek a second opinion before buying a house or opting in for a major medical procedure, be logical with investments. Move away from the dislike, seek out an opposing viewpoint, look at the stock/investment opportunity from a different perspective.

Don’t be emotional: Emotions should not drive our investment decisions. By challenging our personal biases and considering facts instead of feelings, investors can make smarter choices and build a better portfolio.

Focus on facts and fundamentals and keep the personal biases aside! Just like decisions driven by anger can spiral into self-destruction when it comes to life, investment decisions taken (and not taken) because we dislike a person or stock, can lead to mistakes.