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 final condition is that for X to cause Y, there cannot be a factor Z that causes both X and Y. For instance, watching too much television may correlate with obesity. But low socioeconomic status may explain both the television viewing and the weight problem.17
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
do. You needn’t think twice before every decision. Since most decisions will be straightforward, with clear-cut repercussions, the mistakes in this book will not be relevant. We all make lots of decisions every day, and the stakes are generally low. Even when they are not low, the best course is often obvious enough.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Second, these agents interact with one another, and their interactions create structure—scientists often call this emergence.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Three conditions must be in place: diversity, aggregation, and incentives. Each condition clicks into the equation. Diversity reduces the collective error. Aggregation assures that the market considers everyone’s information. Incentives help reduce individual errors by encouraging people to participate only when they think they have an insight.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
22 Most complex adaptive systems are loosely coupled, where removing or incapacitating one or a few agents has little impact on the system’s performance.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
But Taleb makes a careful, if overlooked, distinction: if we understand what the broader distribution looks like, the outcomes—however extreme—are correctly labeled as gray swans, not black swans. He calls them “modelable extreme events.”
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
Consider the system at the correct level. Remember the phrase “more is different.” The most prevalent trap is extrapolating the behavior of individual agents to gain a sense of system behavior.
Michael J. Mauboussin • Think Twice: Harnessing the Power of Counterintuition
In deciding, people often start with a specific piece of information or trait (anchor) and adjust as necessary to come up with a final answer. The bias is for people to make insufficient adjustments from the anchor, leading to off-the-mark responses. Systematically, the final answer leans too close to the anchor, whether or not the anchor is sensib
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