The Illusion of Control

From Jason Zweig’s The Intelligent Investor:

And a streak of being right can make anyone forget how important luck is in determining the outcome.

Research led by psychologist Ellen Langer, now at Harvard University, shows that when people who predict the tosses of a coin are told they got eight out of their first 10 flips correct, they conclude that they are significantly better than average at calling heads or tails—and that they could get well over half their guesses right if the coin were tossed another 100 times.

Prof. Langer called these incorrect beliefs “the illusion of control.”

If, however, people either get most of their early guesses wrong or win and lose in a random pattern, they don’t believe they have any special gift for calling heads or tails; nor do they remember being correct more often than they were.

Guarding against the illusion of control takes constant vigilance. The longer you’ve been right, the harder it gets.

Posted by on April 20th, 2015 at 8:56 am


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