“Markets drop 29 points on below average monsoon prediction”
“Teddy Bear International’s Q1 profits jump 20% because of new strategy measures taken by the management”
“He failed because he did not listen to what I said”
“Katreena bagged first rank in her class because she attended TDH Tutorials”
“United Pokers Alliance lose by-elections because of anti-incumbency factors.”
“Sam G succeeded because of his x, y, z qualities”
“Great companies have BHAG (Big Hairy Audacious Goals)”
Why do we (and newspapers and authors) have to find a reason for anything that happens? Is it because it is very easy to rationalize any outcome. Sometimes we rationalize to justify our decisions (which are already made). While other times, we rationalize in hindsight (this happened because…).
While doing so, we forget about some basic biases we, as human beings, are infected with –
1. Fooled by randomness – Not every outcome need to have a reason. 50 – 100 points here and there in the stock index can just be noise. In success and failure, there is a luck factor.
2. Silent evidence – So, Steve Jobs is successful because he did xyz, but what about thousands of others who were equally talented and who did similar things but are not successful? What about companies who had BHAGs and all qualities of great companies, but failed? What about 1000s of Warren Buffets who lost their shirts in stock markets.
3. Complexity involved – There need not be just one factor involved in the outcome. However, the universe is so complicated that not all these factors can be factored by our human mind. To make out sense in this world, we try to rationalize and simplify it.
Now, here I am also trying to rationalize why we rationalize.