behaviour
Mistaking luck for skill
The rule
In a big crowd, someone will win big by pure luck - like one person out of a thousand guessing every coin toss right. Both they and you will call it skill.
Where it flips
The opposite mistake also happens. Sometimes we call real skill just luck. The sign of true skill is a method that keeps working on new, fresh cases.
Ask a thousand people to flip coins. A few will get ten heads in a row. They may even write books about it. But that was luck, not talent. The real test is simple. Can they do it again, and can they explain how? Luck cannot be repeated on demand. Skill can.
A worked example
Say 1,000 people give stock tips. About 1 gets five calls right just by chance. That one person collects all the followers. [illustrative]
How to spot it
- ·a huge number of people all trying
- ·no clear method that can be repeated
- ·the many losers you never get to see
Nassim Nicholas Taleb · Fooled by Randomness