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The Halo Effect and Outcome Bias
Business experts are keenly aware of whether the company has recently been thriving or failing. The halo effect is so powerful that you probably find yourself resisting the idea that the same person and the same behaviors appear methodical when things are going well. Because of the halo effect, we get the causal relationship backward. We are prone to believe that the firm fails because its CEO is rigid, when the truth is that the CEO appears to be rigid because the firm is failing. This is how illusions of understanding are born.