A NOTE ON SOURCES Hundreds of studies have been conducted on the vast majority of cognitive and behavioural errors. In a scholarly work, the complete reference section would easily double the pages of this book. I have focused on the most important quotes, technical references, recommendations for further reading and comments. The knowledge encompassed in this book is based on the research carried out in the fields of cognitive and social psychology over the past three decades.
SURVIVORSHIP BIAS Survivorship bias in funds and stock market indices, see: Edwin J. Elton, Martin J. Gruber & Christopher R. Blake, ‘Survivorship Bias and Mutual Fund Performance’, The Review of Financial Studies, volume 9, number 4, 1996, 1097–1120. Statistically relevant results by coincidence (self-‐selection), see: John P. A. Ioannidis, ‘Why Most Published Research Findings Are False’, PLoS Med 2(8), 2005, e124.
SWIMMER’S BODY ILLUSION Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (New York: Random House, 2007), 109–110. ‘Ideally, the comparison should be made between people who went to Harvard and people who were admitted to Harvard but chose instead to go to Podunk State. Unfortunately, this is likely to produce samples too small for statistical analysis.’ Thomas Sowell, Economic Facts and Fallacies (New York: Basic Books, 2008), 106. David Lykken & Auke Tellegen, ‘Happiness Is a Stochastic Phenomenon’, Psychological Science, Vol.7, No. 3, May 1996, 189. In his book Good to Great, Jim Collins cites the CEO of Pitney Bowes, Dave Nassef: ‘I used to be in the Marines, and the Marines get a lot of credit for building people’s values. But that’s not the way it really works. The Marine Corps recruits people who share the corps’ values, then provides them with training required to accomplish the organisation’s mission.’
CLUSTERING ILLUSION The random sequence OXXXOXXXOXXOOOXOOXXOO: Thomas Gilovich, How we know what isn’t so: The fallibility of human reason in everyday life (New York: The Free Press, 1993), 16. Daniel Kahneman & Amos Tversky ‘Subjective probability: A judgment of representativeness’. In: Daniel Kahneman, Paul Slovic, Amos Tversky, Judgment under uncertainty: Heuristics and biases (New York: Cambridge University Press, 1982), 32–47. This paper caused controversy because it destroyed many athletes’ and sports commentators’ belief in ‘hot hand’ – in lucky streaks: Thomas Gilovich, Robert Vallone & Amos Tversky, ‘The hot hand in basketball: On the misperception of random sequences’, Cognitive Psychology, 17, 1985, 295–314. The Virgin Mary on toast on the BBC: http://news.bbc.co.uk/2/hi/4034787.stm (accessed Nov 1 2012). The clustering illusion has been recognised for centuries. In the eighteenth century, David Hume commented in The Natural History of Religion: ‘We see faces on the moon and armies in the clouds.’