Narrative Fallacy

Our brain is structured to understand stories. Not by chance, the most successful books in human histories are the ones that used story-telling to teach us some lessons (think of the Bible or the Quran). Why? Because we evolved for millions of years in an environment that was highly practical. As a very social species, most of the danger to us (besides other animals) came from our fellow humans. Thus, to be good at survival, we also had to be extremely good at understanding other people.

That also made us very keen in interpreting the world in an anthropological fashion. That is why we looked at the stars, and we thought that human-like gods governed them. That ability to create a narrative made us very vulnerable. Think of each time you saw the stock exchange drop of few points. You came out with the most beautiful explanation for that happening. From the interest rates too low. To the credit crunch or the level of unemployment. The truth is that complicated thing (like stock markets) most of the time follow a random pattern, which we cannot explain.

Thus, we have to be very careful when we create those narratives. Thus, we are very prone to fall into the narrative fallacy. Or the tendency to give an explanation to things which cannot we cannot explain. In other words, we tend to see chains of cause-effect everywhere. But those chains exist only in our mind!

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