Cause of misjudgment № 10
Influence-from-Mere-Association Tendency
We let mere coincidental association — a pleasant image, a past success, a bearer of bad news — distort judgment about unrelated things.
The mind is a relentless pattern-matcher, and it will draw conclusions from associations that have no real causal basis. Advertisers exploit this constantly: a soft drink is shown beside attractive, happy people on a beach, and the good feeling from the image quietly attaches to the product, even though the product had nothing to do with the happiness. We “learn” to like the can because of the company it keeps.
A subtler and more dangerous version is association with past success. A businessman who got rich in one venture concludes that his methods are universally sound and applies them, with full confidence, in a new field where they do not fit — and loses everything. The previous win is associated with his approach, so the approach feels validated, regardless of whether luck or special circumstances actually produced the win. Munger thought this was a common road to ruin for the formerly successful.
The tendency also runs in reverse: we punish the bearer of bad news. People who deliver unwelcome truths get associated with the unpleasantness they report, so they are disliked and avoided — which trains everyone around a powerful person to tell them only what they want to hear. Munger’s antidotes were to evaluate each decision on its own merits rather than by its incidental associations, and, as a leader, to deliberately welcome bad news so that the messenger is never punished for the message.
