Cognitively Yours 1.31
“Subjects’ unwillingness to deduce the particular from the general was matched only by their willingness to infer the general from the particular.”
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“To be cured of newspapers spend a year reading the previous week’s newspapers”- This is a famous aphorism of Nassim Nicholas Taleb. If one takes it further and read the analysis of various newspapers after last year IPL, one single cause mentioned for the failure of a popular and strong team is “Dad’s army”. A year has passed and the team has turned victorious. The team is more or less same and all the players have aged by one more year. Was it the only reason to fail badly last year.
Though we prefer to be simplistic, is it correct to pinpoint a single reason for the happening of an event.
Remembering Leo Tolstoy’s quote in his magnum opus “War and Love”.
“When an apple ripens and falls — what makes it fall? Is it that it is attracted to the ground, is it that the stem withers, is it that the sun has dried it up, that is has grown heavier, that the wind shakes it, that the boy standing underneath wants to eat it? No one thing is the cause. All this is only the coincidence of conditions under which every organic, elemental event of life is accomplished. And the botanist who finds that the apple falls because the cellular tissue degenerates, and so on, will be as right and as wrong as the child who stands underneath and says that the apple fell because he wanted to eat it and prayed for it.”
They are symptomatic of the most common of all mental errors, a mistake for which, strangely enough, there is no everyday term. For now, the awkward phrase, the fallacy of the single cause, will have to do.
Panic reigned in the financial markets. Banks caved in and had to be nursed back to health with tax dollars. Investors, politicians and journalists probed furiously for the root of the crisis: Central Bank"s loose monetary policy? The stupidity of investors? The dubious rating agencies? Corrupt auditors? Bad risk models? Pure greed? Not a single one and yet every one of these, is the cause.
An unusually hot summer (normally attributed to global warming) , a friend’s divorce, the World Wars, cancer, a school shooting, the worldwide success of a company, the invention of writing - any clear thinking person knows that no single factor leads to such events. Rather, there are hundreds, thousands, an infinite number of factors that add up. Still, we keep trying to pin the blame on just one.
Suppose you are the product manager of a well-known mutual fund. You have just launched a New Fund Offer. After a few days, it’s painfully clear that the new product is a flop. This is all the more painful as your competitor has mobilised record assets in their recently launched fund.
How do you go about investigating the cause? First you know that there will be never one single factor. Take a sheet of paper and sketch out all the potential reasons. Do this for reasons behind these reasons. After a while, you will have a network of possible influencing factors. Second highlight those you can change and delete those you cannot change. Third, conduct empirical tests by varying the highlighted factors in different markets. This costs time and money, but it’s the only way to escape the swamp of superficial assumptions.
The fallacy of the single cause is as ancient as it is dangerous. We have learned to see people as the “master of their own destinies”.
Aristotle proclaimed this 2500 years ago. We now realise that our actions are brought about by the interaction of thousands of factors - from genetic predisposition to upbringing, from education to the concentration of hormones between individual brain cells. Still we cling firmly to the old image of self governance. As long as we believe in singular reasons, we will always be able to trace triumphs or disasters back to individuals and stamp them “responsible.” The idiotic hunt for a scapegoat goes hand-in-hand with the exercise of power - a game that people have been playing for thousands of years. This happens in politics, sports and every field where there is competition and success is not certain.
The “single factor fallacy” ignoring various other factors lead us to causality. There is another problem - one has to accept a cause and effect, meaning that the even in the market can be linked to the cause proffered. Post hoc ergo propter hoc (it is the consequence because it came after). Say a hospital A delivered 52% boys and hospital B delivered the same year only 48%; would you try to give the explanation that you had a boy because it was delivered in hospital A?
Nassim Nicholas Taleb in his book writes “For Hume, the necessary connection invoked by causation is nothing more than this certainty. Hume’s Copy Principle demands that an idea must have come from an impression, but we have no impression of efficacy in the event itself. Instead, the impression of efficacy is one produced in the mind. As we experience enough cases of a particular constant conjunction, our minds begin to pass a natural determination from cause to effect, adding a little more “oomph” to the prediction of the effect every time, a growing certitude that the effect will follow again. It is the internal impression of this “oomph” that gives rise to our idea of necessity, the mere feeling of certainty that the conjunction will stay constant. Ergo, the idea of necessity that supplements constant conjunction is a psychological projection. We cannot help but think that the event will unfurl in this way.
Casualty can be very complex. It is difficult to isolate a single cause when there are plenty around. For instance, if the stock market can react to US domestic interest rates, the dollar against the yen, the dollar against the European currencies, the European stock markets, the United states balance of payments, the United States inflation, and another dozen prime factors, then we need to look at all of these factors, look at their historical effect both in isolation and jointly look at the stability of such influence, then after consulting the test statistic, isolate the factor if it is possible to do so. Finally a proper confidence level needs to be given to the factor itself; if it is less than 90 per cent, the story would be dead. I can understand why Hume was extremely obsessed with causality and could not accept such inference anywhere - Nassim Nicholas Taleb.
Nisbett and Borgida found that when they presented their students with a surprising statistical fact, their students managed to learn nothing at all. But when the students were surprised by individual cases they immediately made the generalisation and inferred .
“Subjects’ unwillingness to deduce the particular from the general was matched only by their willingness to infer the general from the particular.”
Statistical results with a causal interpretation have stronger effect on our thinking than non causal information. But even compelling causal statistics will not change long-held beliefs or beliefs rooted in personal experience. On the other hand, surprising individual cases have a powerful impact and are more effective tool for teaching psychology because the incongruity must be resolved and embedded in casual story.
The problem of causality leads to “The problem of induction or problem of inductive knowledge”, which is certainly the mother of all problems in life. How can we logically go from specific instances to reach general conclusions? There are traps built into any kind of knowledge gained from observation.
The famous example Taleb uses in his book is the Thanksgiving turkey. Consider a turkey that is fed every day, every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race looking out for its best interests, as a politician would say. “On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief”.
To sum up, avoid attributing a single cause for the event that has happened. How do you go about investigating the cause?
First you know that there will be never one single factor. Take a sheet of paper and sketch out all the potential reasons. Do this for reasons behind these reasons. After a while, you will have a network of possible influencing factors. Second highlight those you can change and delete those you cannot change. Third, conduct empirical tests by varying the highlighted factors in different markets. This costs time and money, but it’s the only way to escape the swamp of superficial assumptions.
References: Fooled by Randomness by Nassim Nicholas Taleb, Black Swan by Nassim Nicholas Taleb, Thinking Fast and Slow by Daniel Kahneman, The Art of Thinking Clearly by Rolf Dobelli
Photo credit: @vectorjuice - www.freepik.com
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