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Published by:
Harvard Business Publishing (2009)
Chapter from:
"Think Twice: Harnessing the Power of Counterintuition"
37 pages


If you put a tray of water in your freezer, the water's temperature gradually drops to the freezing point. The water remains liquid until - ah-whoom - it turns to ice. In this chapter from his book 'Think Twice', behavioral finance expert Michael Mauboussin explains phase transitions (also known as 'black swans'), in which small incremental changes (like the gradual drop toward the freezing point) lead to large-scale effects (liquid turns solid). Since cause and effect are difficult to identify when phase transitions occur, it's almost impossible to predict the outcome. Using a broad array of compelling examples, from the behavior of stock exchanges to the popularity of hit songs, Mauboussin explains the impact of phase transitions on decision making and gives you practical tips on how to deal with systems that are marked by abrupt, unforeseeable changes. This chapter is excerpted from ‘Think Twice: Harnessing the Power of Counterintuition'.


Decision making; Predictable surprises; Strategic thinking

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