2 Ideas are associated with this:
1. Narrative Fallacy
Meaning
- Reality can be complex. There can be a lot of moving parts that lead to an outcome.
- But human minds tend to cherry-pick instances that result in the outcome. A clear chain of causation.
- This happens because, our brains are evolved to find patterns(Narratives) to make sense of stuff around us so that we can tap on it the next time it happens.
- Essentially, a narrative is like a compression algorithm. We compress our realities into zip-files with clear cause-effect and store them in our brains for easy application.
- Eg:
- Amazon’s success has been tied with “relentless focus on customers“. Which is one aspect, but not the whole truth. There are other factors like, Jeff Bezos’ vision, technological shifts with respect to GPS etc.
Why We Do This
- One Explanation is Kolmogorov Complexity — the notion that the more random something is, the harder it is to compress into a short description.
- So our minds compress reality(often filled with complex information) into stories for better understanding and retrieval.
The Fallacy
- Narratives compress reality.
- It helps in understanding. But also removes information.
- It puts forth a clear chain of causation which removes any scope for randomness.
- The story becomes cleaner than reality.
2. Hindsight Bias
Meaning
- It is the tendency to believe, after an event has occurred, that you would have predicted it before-hand. But if you go back and reconstruct the outcome from what was actually known before the event, it may end up looking different than what actually occurred.
Why It Happens
- You unconsciously rewrite your recollection of what you believed before to have some reasonable connection to the outcome.
- In simple terms, you create a narrative and a clear chain of causation.
Why It Matters
- You end up learning the wrong lessons:
- Instead of evaluating decisions based on information available at the time, we evaluate them based on outcomes.
- Scope out randomness
- Once you create a cause-effect chain, you tend to negate the existence of randomness.