We tend to recall our winners disproportionately, a wiring flaw in our human composition.
I first became acquainted with this fact when someone dear to me began touting her remarkable track record with matchmaking friends. She liked to entertain friends at social gatherings with the two marriages that had come into being due to her intervention.
Much was made by the admiring crowd of the addition to the world's net happiness and subtraction from the world's net loneliness that resulted from said matchmaker's contributions to society.
But a numerator is only useful if you know the denominator. And having witnessed a rather large partial denominator of matches that never worked out, I was understandably less taken by the successes.
I was reminded of this while picking up a book it seems that I've been in the process of reading for at least half a decade, The Black Swan by Nassim Nicholas Taleb. It's a stew of interesting ideas that a particularly wry, erudite favorite professor with an acid tongue and an eye for the absurd might voice during a departmental happy hour.
Taleb was describing the fallacy of methodically examining numerous successful millionaires, finding characteristics they have in common (e.g., early riser, eats tofu, optimistic, sleeps on stomach) and concluding that one should emulate these characteristics in order to improve one's odds of attaining millionaire status.
His point was that the substantial number of early rising, tofu eating, stomach sleeping optimists who never attained millionaire status (i.e., the appropriate denominator) were never taken into consideration when compiling this list of millionaire characteristics.
I've clearly fallen for this bait many a time. ESI Money's millionaire interview series is compelling clickbait, and I like to believe I learn a little more about the many roads to wealth accumulation with each story I read.
Even recent posts extolling lessons from ex-presidents seem to overlook the far greater denominator of non-ex-presidents that have equally valuable lessons I might learn from.
Why do I seem so willing to take heed of lessons from these sources, or assume the subjects of a book like Stanley and Danko's The Millionaire Next Door are legitimate rather than lucky?
I am clearly not so charitable when it comes to attributing skill to the 10-15% of active equity managers who manage to persistently beat their comparable stock index.
I'll conclude with a footnote from the book that caught my whimsy and seemed to summarize the contradictions inherent in doctors:
Doctors are rightfully and vigorously skeptical of anecdotal results, and require that studies of drug efficacy probe into the cemetery of silent evidence. However, the same doctors fall for the bias elsewhere! Where? In their personal lives, or in their investment activities. At the cost of being repetitive, I have to once again state my amazement at the aspect of human nature that allows us to mix the most rigorous skepticism with the most acute gullibility.
Bravo, Mr. Taleb.
I am precisely this kind of sucker, but I'm trying to protect my finances from my more harmful instincts.