The illusion of skill refers to the belief that skill, not chance or luck, accounts for the accuracy of predictions of things that are unpredictable, such as the long-term weather forecasts one finds in farmers’ almanacs and the predictions of market gurus about the long-term ups and downs of the stock market. The illusion of skill also accurately describes the apparent accuracy of remote viewers. Given all the guesses remote viewers make about what they claim to see telepathically, chance alone would account for some of those guesses being somewhat accurate. Much of the accuracy ascribed to remote viewers, however, is due to the liberal and generous interpretations given by themselves or “experts” of their vague and ambiguous descriptions of places or things. Also, subjective validation accounts for the illusion of skill of “experts” in such fields as palm reading, mediumship, astrology, and criminal profiling.
Stock gurus–people who predict the rise and fall of the price of stocks and have large numbers of people who act on their predictions–are essentially part of an entire industry “built largely on an illusion of skill” (Daniel Kahneman, Thinking, Fast and Slow, p. 212). No market guru has gone broke selling advice, however, despite the fact that market newsletters are–in the words of William A. Sherden–“the modern day equivalent of farmers’ almanacs” (The Fortune Sellers, p. 102). In 1994, the Hurlbert Financial Digest found that over a five-year period only one out of 108 market-timing newsletters beat the market. You might think that that one did so because of skill, but you’d be wrong. Chance alone would predict that more than one out of 108 would beat the market.
- Unnatural Acts that can improve your thinking: illusion of understanding (illuminutti.com)
- Unnatural Acts that can improve your thinking: selection bias (illuminutti.com)
- Unnatural Acts that can improve your thinking: inattentional blindness (illuminutti.com)