Thursday, May 14, 2009

Over Thinking Things

I just read this in Money magazine and I felt it was especially apt for pretty much anything. It is from an interview with Philip Tetlock, a guy who studies the odds of financial forecasters and how much they get right.

"I once witnessed an experiment that pitted a classroom of Yale undergrads against a lone Norwegian rat in a T-maze. Food was put in the maze in no particular pattern, except that it was designed to end up in the left side of the "T" 60% of the time. Eventually, the rat learned always to turn left and so was rewarded 60% of the time. The students, on the other hand, fell for a variant of the"gambler's fallacy." Picture a roulette player who sees a long sequence of red and puts all his money on black because it's "due." Or more subtly, he looks for complex alternating patterns - the same kind of mental wild-goose chase that technical stock pickers go on. That's what happened to the Yalies, who kept looking for some pattern that would predict where the food would be every time. They ended up being right just 52% of the time. Outsmarted by a rat."

Now I understand they were just undergrads, but hey, I feel this can happen to anyone of us. Over thinking things has become a staple of human life. We always try to find what isn't there. Sometimes we just need to sit back and look for the simpler pattern. Sometimes it is just that simple.

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