The Narrative fallacy

“The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship upon them. Explanations bind facts together.”

Nassim Nicholas Taleb

Underlying each identity is an attractive story, that is represented in media, or by people you know. The individual constructs an ideal, based on these narratives, and decides to embody it as best they can. No person can have a meaningful life without a story that they find appealing.

There is nothing more traumatic to the human mind, that craves order and predictability, than the total dissolution of narratives. We are built for stories. Ancient myths guided the lives of our ancestors, and modern myths guide the lives of people today.

But the same mechanism which simplifies the world into digestible parts, and leads to the creation of coherent stories, is responsible for the narrative fallacy.

In The Black Swan, Nassim Taleb recalls a funny story that demonstrates how easy it is to fall into the narrative trap. He attended a lecture by an Italian professor, and found himself agreeing with everything that was said. After the lecture, Taleb and the Italian professor offered each other mutual congratulatory remarks. The Italian told Taleb that he had wished he had written Fooled by Randomness – he strongly agreed that humans have a tendency to see patterns where they don’t exist. But moments later, he says:

“But, mon cher ami, let me tell you quelque chose [uttered very slowly, with his thumb hitting his index and middle fingers]: had you grown up in a Protestant society where people are told that efforts are linked to rewards and individual responsibility is emphasized, you would never have seen the world in such a manner. You were able to see luck and separate cause and effect because of your Eastern Orthodox Mediterranean heritage.” He was using the French à cause. And he was so convincing that, for a minute, I agreed with his interpretation.”

The Black Swan, Nassim Taleb

A gambler associates false patterns to the serendipitous appearance of random numbers on a roulette wheel. He convinces himself that he’s found a mysterious pattern that only he can predict. But it’s not just the gamblers who are prone to seeing patterns where they don’t exist. Academics, politicians, business owners, and investors all mistake their false impressions of reality for reality.

The tendency to find patterns in random data is what Taleb’s book Fooled by Randomness was about. His next book, The Black Swan was about what happens after you are fooled by randomness. That is, after you have accepted a narrative of how events will unfold, an anomalous event blows up all of your previous impressions of the world. For a long time, people thought only white swans exist, because they only saw white swans. And then one day, a black swan was finally spotted. The black swan is what you leave out in your story.

The Russian scientist, Sokolov, describes a similar process as the Orienting Reflex. When everything is working properly, you are happy to allow your automatic behaviors to guide you. As soon as a new stimulus is introduced, that you are not used to, you are interrupted and must now re-organize your understanding. Sometimes, such a process can take years.

The Italian professor that was an admirer of Taleb’s work couldn’t help but construct his own narrative of why Taleb was able to see the primacy of luck. Our vulnerability to overinterpret events and favor stories over raw truths distorts our ideas about the world. This is especially true when we encounter a rare event.

There is an experiment where psychologists asked women to choose form 12 pairs of nylon stockings their favorite pair. The researchers then asked the women the reasons for these choices. Of course, they were given many reasons, including “feel”, texture, and color. The stockings were identical. Split-brain experiments also show that we have a tendency to provide explanations for things, even if we do not understand them.

Why do we try to reduce complexity? First of all, gaining more information is costly. Second, storing that information is costly. The more random, the less patterned that information – the more difficult it is to store. Thirdly, information is costly to manipulate and retrieve.

“Compression is vital to the performance of conscious work.”

Art and science are enterprises that seek to reduce complexity, and introduce order. A novel or a myth has the same function as a scientific theory or a piece of art, they spare us from the complexity of the world.

To view the potency of narrative, consider the following statement: “The king died and the queen died.” Compare it to “The king died, and then the queen died of grief.”

When Saddam Hussein was Captured

Taleb tells another story, that happened in 2003, when Saddam Hussein was captured. After the big event, Bloomberg News flashed the headline at 13:01: “Treasuries rise, Hussein Capture May Not Curb Terrorism.”

Whenever something happens in the markets, the media feel obligated to justify it with a “reason.” 30 minutes later, they issue a new headline (after the U.S Treasury bonds fall in price): U.S Treasuries Fall; Hussein Capture Boosts Allure of Risky Assets.”

Fluctuations happen throughout the day, so there was nothing special going on.

Earthquakes in California

In Thinking: Fast and Slow, Kahneman writes about a survey that was given, that asked respondents to imagine the following scenarios and estimate which one was more likely to happen.

a. A massive flood somewhere in America in which more than a thousand people die.
b. An earthquake in California, causing massive flooding, in which
more than a thousand people die.

Respondents thought that the second event was more likely. This was because of the Availability Heuristic. When information is easy to retrieve, it seems more probable.

During the Lebanese civil war, a story about an Italian child who fell into a well received more empathy and attention among some Lebanese in Beirut than catastrophes occurring next door. The death of someone you know in a motorcycle accident is more likely to change you attitude toward motorcycles than volumes of statistical analyses.

Taleb concedes that that narratives work in Mediocristan (when events follow an average) rather than in Extemistan (when anomalies exist).

How to Avoid the Narrative Fallacy

The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories.

Being empirical does not mean running a laboratory in one’s basement: it is just a mind-set that favors a certain class of knowledge over others. I do not forbid myself from using the word cause, but the causes I discuss are either bold speculations (presented as such) or the result of experiments, not stories.

The Black Swan, Nassim Taleb

But personal experience is not always more instructive than history. For example, base rate neglect occurs when one forgets objective measures, and favors a narrative. Kahneman gives the example: “Steve, a tidy and meek soul, has a need for order. Is Steve more likely to be a librarian or a farmer?” Neglecting base rate would lead people to assume Steve is more likely to be a librarian, despite the fact that librarians are very rare (it is more likely to find to tidy farmer than any librarian since there are many more farmers).

Similarly, when you favor personal experiences over objective measures, you can still make errors. You may overemphasize your own experiences and underemphasize the experiences of others.