Deprival-Superreaction Tendency

One of the psychological tendencies in Charlie Munger’s self-built system, laid out in Charlie Munger — The Psychology of Human Misjudgment. It names the way “a man ordinarily reacts with irrational intensity to even a small loss, or threatened loss, of property, love, friendship, dominated territory, opportunity, status, or any other valued thing.” Munger’s signature example: a man with $10 million in his brokerage account “will often be extremely irritated by the accidental loss of $100 out of the $300 in his wallet” — because, “in displaying Deprival-Superreaction Tendency, man frequently incurs disadvantage by misframing his problems. He will often compare what is near instead of what really matters.” A natural consequence is that “bureaucratic infighting over the threatened loss of dominated territory often causes immense damage to an institution as a whole.”

Munger pairs it with Inconsistency-Avoidance Tendency to explain why extreme ideologies are held with such intensity and antipathy to non-believers, prescribing “an extreme culture of courtesy” and the deliberate inclusion of “able and articulate disbelievers” as antidotes. Kyle’s annotation maps the tendency onto Loss Aversion — “relative loss or gain” — citing the felt difference between saving $10 on a $30 purchase versus a $1,000 one, and the way small per-month car payments add up to something large.

Where this appears

• Charlie Munger — The Psychology of Human Misjudgment — Munger’s named tendency on irrational over-reaction to small/threatened losses, the $100-from-$300 example, and its pairing with Inconsistency-Avoidance behind ideological groupthink; Kyle annotates it onto Loss Aversion.