Michael Mauboussin's 'Think Twice': A cautionary tale for investors

Whether it's the "irrational exuberance" of the last decade or the apocalyptic view that prevailed last winter, investor psychology tends to be shortsighted and veer toward extremes. But investors need to overcome myopia and getting lost in the moment, Michael Mauboussin, the chief investment strategist of mutual fund giant Legg Masson Asset Management argues. And in his new bookThink Twice: Harnessing the Power of Counterintution (Harvard Business School Press), he attempts to outline how all decision-makers can be aware of and counter their own biases.

Investors need to test the worldview that spirals out of a situation -- what Mauboussin calls the "inside view" -- with a broader perspective that takes factors like history and statistics into account.