Think Twice

Morgan O'Rourke


November 1, 2009

book-think-twiceIn 2007, Malcolm Gladwell's best-selling book Blink made a compelling case for the virtues of split-second decision making. Two years later, Michael Mauboussin, chief investment strategist at Legg Mason Capital Management and a finance professor at Columbia Business School, takes the opposite view in Think Twice, suggesting that our instincts are often wrong.

Through fascinating real-life examples including horse racing, wine sales, Netflix movie recommendations and bridge construction, Mauboussin shows how common mental mistakes lead us to poor decisions even when we think we're applying reason and logic to a situation. For instance, our inability to take the experiences of others into account when making a decision creates a false sense of optimism and explains why corporations are so willing to initiate mergers and acquisitions despite their poor record of success. Or how our tendency to oversimplify complex systems makes us underestimate the consequences of individual actions on the larger system, leading to situations like the financial crisis, in which the behavior of individual institutions had major repercussions on the economy as a whole. It even explains how a misunderstanding of luck and skill encourages investors to chase the so-called "hot" stock only to end up buying high and selling low.

Through these examples, and many others, Mauboussin skillfully shows how these subconscious errors in judgment impact our personal and professional lives every day. By helping readers recognize where their thinking might go astray, Think Twice forces them look at life differently, regardless of what their intuition might say.

Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)