Chapter 3. Patterns and Predictions

Did you read your horoscope today? Maybe you prefer having your palm read, spreading the tarot cards, or analyzing tea leaves?

People naturally look for patterns and consequences in their daily lives. Someone notices a pattern and an ensuing consequence. This person tells a friend, who also sees the pattern, and a future superstition is born. Many years later, we are throwing salt over our shoulders, knocking on wood, avoiding black cats, and not walking under ladders. Okay, that last one seems reasonable to me. People are good at seeing patterns and consequences where none exist.

This chapter illustrates that people (primarily investors) see patterns in randomness and then make predictions about the future from ...

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