How humans use denial to distort reality and the problems it can create
08-Sep-2015 •Mohammed Ekramul Haque
What is it? This is the tendency of humans to deny reality just to avoid pain. Denial is a common occurrence in the cases of tragedies. Not able to accept a tragic outcome, we tend to refute the fact that the tragedy has occurred. Charlie Munger cites the example of a son of a family friend, "This phenomenon first hit me hard in World War II when the superathlete, superstudent son of a family friend flew off over the Atlantic Ocean and never came back. His mother, who was a very sane woman, then refused to believe he was dead. That's simple, pain-avoiding psychological denial."
Often found in: Instances of loss, death, drug abuse
In Life: How does simple, pain-avoidance psychological denial play out in real life? Munger explains, "The reality is too painful to bear, so one distorts the facts until they become bearable. We all do that to some extent, often causing terrible problems. The tendency's most extreme outcomes are usually mixed up with love, death, and chemical dependency."
Drug addicts or excessive drinkers similarly undergo this process of denial. Says Munger, "Addicted persons tend to believe that they remain in respectable condition, with respectable prospects. They thus display an extremely unrealistic denial of reality as they go deeper and deeper into deterioration... One should stay far away from any conduct at all likely to drift into chemical dependency. Even a small chance of suffering so great a damage should be avoided."
You just read about one of the misjudgements people generally make while investing. Read 25 ways to (Not) make mistakes to get an account of Charlie Munger's twenty-five typical misjudgements, along with our commentary on how they fit into Indian businesses and Indian investments.