This text draws on work in political science, economics, cognitive science and psychology to offer an innovative theory of how people and organizations adapt to change and why these adaptations do not always work. The author argues that our decision-making capabilities are rational and adaptive, but because our rationality is bounded and our adaptability limited, our actions are not based simply on objective information from our environments. Instead, we overemphasize some factors and neglect others, and our inherited limitations - such as short-term memory capacity - all act to affect our judgement.