In November of last year the world lost one of the great investors. Charlie Munger was just five weeks shy of his 100th birthday – a man who’d learned two lifetimes of lessons in the one and a half lives he’d had. As Warren Buffett’s right hand man Charlie had amassed a fortune as a shrewd investor and it was his understanding of human nature, as something of an amateur psychologist, that prepared Charlie well for this process. Sadly it seems he’d broken one of his own cardinal rules – know where you’re going to die and make sure you never go there!
Many of Charlie’s observations of human nature in investing apply equally as well when it comes to understanding staff and customer behavior. Below I have highlighted some of the key traits Charlie had.
Reward and Punishment Tendency: Human beings are often driven by the prospect of rewards or the fear of punishments. Whether it’s a customer seeking discounts or an employee striving for a promotion, the allure of rewards and the aversion to punishments shape decision-making processes.
Liking/Loving Tendency: People tend to overlook faults or favor individuals, products, or actions associated with what they love. This bias can influence customer loyalty and employee commitment, as individuals gravitate towards what resonates with their emotions. The old saying that we buy the people not the product can never be more true.
Dislike/Hating Tendency: Conversely, the dislike/hating tendency drives individuals away from objects or people they harbor negative feelings towards. This aversion can lead to customer churn or workplace conflicts if not addressed effectively.
Doubt Avoidance Tendency: The rush to make quick decisions without all the facts stems from doubt avoidance tendency. In customer service, this may lead to impulsive purchases, while in staff management, it can result in hasty decisions without proper evaluation.
Inconsistency/Avoidance Tendency: Human beings are often reluctant to take actions needed to change or eliminate bad habits. This tendency can hinder organizational growth if employees resist adapting to new processes or technologies. Both this, and the doubt avoidance tendency can be attributed to our inherent laziness. The simpler you make it the more likely something will happen.
Curiosity Tendency: Curiosity drives exploration and discovery, influencing customer engagement with new products or services and inspiring staff to seek innovative solutions to challenges. This can often show up in our desire to “see something new” whether it is more product choices or a new means of staff training.
Fairness Tendency: The innate desire to do what is right for others guides customer service interactions and workplace dynamics, fostering trust and cooperation. We inherently want to do what’s right in most circumstances.
Envy/Jealousy Tendency: Warren Buffett once remarked, “It’s not greed that drives the world, but envy.” Envy can fuel consumer trends and workplace dynamics, influencing perceptions of fairness and equality. Envy between staff over their perceived equal treatment, or customers over getting the same “good deal” as someone else can motivate many adverse reactions.
Reciprocation Tendency: The desire to reciprocate favors received influences customer loyalty programs and workplace camaraderie, creating mutually beneficial relationships.
Association Tendency: The inclination to believe in social proof affects consumer purchasing decisions and employee perceptions of organizational culture. This is why social likes and customer Google reviews have become such critical parts of the purchasing process. Most people would rather be wrong than go against the accepted group-think.
Understanding these psychological tendencies is crucial for businesses aiming to optimize customer experiences and foster a positive work environment. By recognizing and addressing these influences, organizations can better meet the needs of both customers and staff, ultimately driving success in an ever-evolving marketplace.
Next time we’ll discuss the remaining ten tendencies and how they can impact your business interactions.
Link to Article
Many of Charlie’s observations of human nature in investing apply equally as well when it comes to understanding staff and customer behavior. Below I have highlighted some of the key traits Charlie had.
Reward and Punishment Tendency: Human beings are often driven by the prospect of rewards or the fear of punishments. Whether it’s a customer seeking discounts or an employee striving for a promotion, the allure of rewards and the aversion to punishments shape decision-making processes.
Liking/Loving Tendency: People tend to overlook faults or favor individuals, products, or actions associated with what they love. This bias can influence customer loyalty and employee commitment, as individuals gravitate towards what resonates with their emotions. The old saying that we buy the people not the product can never be more true.
Dislike/Hating Tendency: Conversely, the dislike/hating tendency drives individuals away from objects or people they harbor negative feelings towards. This aversion can lead to customer churn or workplace conflicts if not addressed effectively.
Doubt Avoidance Tendency: The rush to make quick decisions without all the facts stems from doubt avoidance tendency. In customer service, this may lead to impulsive purchases, while in staff management, it can result in hasty decisions without proper evaluation.
Inconsistency/Avoidance Tendency: Human beings are often reluctant to take actions needed to change or eliminate bad habits. This tendency can hinder organizational growth if employees resist adapting to new processes or technologies. Both this, and the doubt avoidance tendency can be attributed to our inherent laziness. The simpler you make it the more likely something will happen.
Curiosity Tendency: Curiosity drives exploration and discovery, influencing customer engagement with new products or services and inspiring staff to seek innovative solutions to challenges. This can often show up in our desire to “see something new” whether it is more product choices or a new means of staff training.
Fairness Tendency: The innate desire to do what is right for others guides customer service interactions and workplace dynamics, fostering trust and cooperation. We inherently want to do what’s right in most circumstances.
Envy/Jealousy Tendency: Warren Buffett once remarked, “It’s not greed that drives the world, but envy.” Envy can fuel consumer trends and workplace dynamics, influencing perceptions of fairness and equality. Envy between staff over their perceived equal treatment, or customers over getting the same “good deal” as someone else can motivate many adverse reactions.
Reciprocation Tendency: The desire to reciprocate favors received influences customer loyalty programs and workplace camaraderie, creating mutually beneficial relationships.
Association Tendency: The inclination to believe in social proof affects consumer purchasing decisions and employee perceptions of organizational culture. This is why social likes and customer Google reviews have become such critical parts of the purchasing process. Most people would rather be wrong than go against the accepted group-think.
Understanding these psychological tendencies is crucial for businesses aiming to optimize customer experiences and foster a positive work environment. By recognizing and addressing these influences, organizations can better meet the needs of both customers and staff, ultimately driving success in an ever-evolving marketplace.
Next time we’ll discuss the remaining ten tendencies and how they can impact your business interactions.
Link to Article