What was Charlie Munger's prediction regarding the psychological barriers to AI-assisted investing?

What Are Munger's Predictions on Psychological Barriers to AI-Assisted Investing?

Hey there! I'm a huge fan of Munger and love studying his investment philosophy and perspectives on behavioral psychology. Munger (Charlie Munger, Warren Buffett's longtime partner) had some fascinating views on AI in investing. Though not a tech expert, he predicted—from a psychological standpoint—that people would face certain mental hurdles when using AI for investment assistance. These barriers stem from human nature itself, not flaws in AI. Let me briefly explain his key predictions in plain language.

1. Overconfidence Bias

Munger often said people tend to overestimate their own smarts, especially in a "smart person's game" like investing. He predicted that when AI offers investment advice, many investors would think: "What does AI know? My intuition and experience are more reliable!" For example, if AI flags a stock as high-risk based on data, you might ignore it simply because you made money on it before. That’s overconfidence—overrating our own judgment while underestimating AI’s objectivity. Munger believed this would waste AI’s potential, as people refuse to admit machines might be more rational.

2. Illusion of Control

Investing is inherently about feeling in control. Munger noted that people prefer making their own decisions, even if wrong, because it’s "their choice." With AI assistance—say, automated portfolio recommendations—many would feel a loss of control, creating discomfort. It’s like preferring to grip the steering wheel yourself rather than ride in a self-driving car. Munger predicted this psychology would make investors resist AI, choosing to err rather than "entrust their fate to a machine."

3. Confirmation Bias

One of Munger’s favorite psychological concepts. He argued people seek evidence supporting their views while dismissing contradictions. If AI suggests something conflicting (e.g., "avoid this hot stock"), you might ignore it and hunt for reasons to prove yourself right. Munger foresaw this bias intensifying in the AI era: while AI speaks through data, humans are emotionally driven, pushing investment decisions further from rationality.

4. Fear of the Unknown and Lack of Trust

Munger wasn’t an AI skeptic but recognized humans’ innate wariness of new tech. With money at stake, who dares trust a "black-box" algorithm? What if AI errs? He predicted this fear would be a major barrier, especially for older investors who trust their "gut feeling" over AI’s calculations. The result? Many would delay adopting AI tools until seeing others succeed first.

These predictions stem from Munger’s behavioral finance lens—he always stressed that "psychology is key to investing." He didn’t dismiss AI; in fact, he believed it could help counter human weaknesses. The catch? We must overcome these psychological barriers first. For example, when I used AI tools for investing, it felt awkward initially—I kept wanting manual control. But adapting paid off, helping me avoid impulsive decisions.

If you’re new to this, start with Munger’s book Poor Charlie's Almanack—it’s packed with wisdom on decision-making biases. Feel free to ask more questions anytime!