behaviour
Judging by resemblance
The rule
We call a thing a winner because it looks like our picture of a winner, and skip the real odds. "It's the next big one" is a story, not a check.
Where it flips
Looking alike is not always wrong; sometimes the pattern is real. Where it misleads: the look replaces the odds. The fix: put the story next to the real record, how often do lookalikes actually deliver, before you trust it.
Instead of asking "how often does this kind of thing work out?", we match the case to a picture in our head: a smooth story, a hot sector, a chart that looks like the last big winner. Then we assume it will behave the same way. Looking alike takes the place of the real odds. The picture feels safe, but it is not proof.
A worked example
A new company is in the same hot sector as last year's star, so people assume it will fly too. They forget that most companies in any famous sector are ordinary, and many fail. [illustrative]
How to spot it
- ·saying "it's the next [famous winner]"
- ·a rough picture standing in for the numbers
- ·no check of how often this pattern really pays
Amos Tversky & Daniel Kahneman · Behavioural finance research