behaviour
A vivid story beats a boring base rate, wrongly
The rule
Before you believe a multibagger story, ask a plain question: how often does that kind of bet actually pay off?
Where it flips
A base rate can mislead if a real change makes this case different from the crowd it belongs to. The fix is to name the one specific fact strong enough to move the base rate. Do not let a single story beat the frequency with no such fact.
A vivid story of a stock that turned little money into a lot feels very convincing. It beats the dull record of how rarely that really happens. The mind grabs the story and forgets the base rate, which is just how often that outcome shows up across many tries. The fix is to look up how often the whole class of such bets pays, before letting one story decide.
A worked example
A reader hears of someone who made ten times their money on a penny stock, and feels it could be them next. But the base rate, how many such stocks really multiply versus how many fade to nothing, is far worse than the one story suggests. [illustrative]
How to spot it
- ·one dramatic winner used as proof
- ·no count of how the class usually ends
- ·the story vivid, the odds left unsaid
- ·'this time is different' with no fact named
Daniel Kahneman · Thinking, Fast and Slow