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Past Experience Can Lead Us Astray


 

"The illusion that we understand the past fosters overconfidence in our ability to predict the future."


-Daniel Kahneman

 

Imagine I organize a coin-flipping contest. In this contest, 1,000 people square off in a March Madness-like bracket, with 500 first-round matches. The winner of each match is the one who flips the most heads in a row. After about 10 rounds we find ourselves watching the championship between the best two head-flippers.


We know this is a competition that doesn't rely on skill. Yet, the final two out of 1,000 will feel a sense of control over the outcome. We know, because we are outside of the situation, that no matter what happens there has to be two final people, and then a winner. That's just math.


A funny thing happens when you are the one experiencing the random math. Imagine you did "win" two matches, then three, and four, and so on. Our experience is that we flipped seven heads in a row, several times.


The outcome of our experience had to happen to someone, but the fact that it was us is random. Though we feel like we have some control, we're missing the bigger point.


Let me tell you something you already know; this phenomenon doesn't just happen with flipping coins.


law of small numbers

Recognizing Patterns


We are very good at spotting patterns. Random things happen all the time and we're been wired to think there's meaning behind it. We might call these coincidences.


The ability t