Think Twice: Harnessing the Power of Counterintuition
When outcomes are really good because of a dose of good luck, prepare for the times when they will be closer to the average. When outcomes are disappointing as the result of bad luck, recognize things will get better.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
They convincingly argue that we can easily nudge people toward a particular decision based solely on how we arrange the choices for them.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
However, once you realize the answer to most questions is, “It depends,” you are ready to embark on the quest to figure out what it depends on.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Attribute-based theories focus on analyzing and evaluating the intrinsic characteristics or qualities of something. These theories emphasize the importance of specific attributes or features when making judgments or decisions. For example, when assessing a company's stock, an attribute-based approach might consider factors such as the company's financial health, market share, competitive advantage, and management team's experience. The theory assumes that these attributes directly influence the company's performance and can be used to predict future outcomes.On the other hand, circumstances-based theories focus on the external context or situational factors that surround a particular event or decision. These theories suggest that the circumstances surrounding a situation play a significant role in determining outcomes, sometimes overshadowing the intrinsic attributes. For instance, in the stock market, a circumstances-based approach might consider macroeconomic factors, industry trends, geopolitical events, or market sentiment to assess the potential performance of a stock. This theory suggests that even a company with strong attributes may face challenges or benefit from favorable circumstances beyond its control.
The change in value for the buyer equals the difference between the increase in cash flow from combining the two companies (synergies) and the amount over the market value that the acquirer pays (premium). Companies want to get more than they pay for. So if synergies exceed the premium, the price of the buyer’s stock will rise. If not, it will fall
... See moreMichael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
the valence of the lottery gains or property losses swamps the associated probabilities of winning or losing.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Last, a mental model is an internal representation of an external reality, an incomplete representation that trades detail for speed.5 Once formed, mental models replace more cumbersome reasoning processes, but are only as good as their ability to match reality. An ill-suited mental model will lead to a decision-making fiasco.6
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Next, we need experts for strategy.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
“fundamental attribution error” to describe the tendency to explain behavior based on an individual’s disposition versus the situation.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Denrell argues that the first impression you have of a person or organization can determine your future degree of interaction. So if you run a business that deals with customers, it is especially important to make sure that you make a favorable first impression.