Epiphenomena
Epiphenomena are causal illusions where the observation of a correlation leads to the mistaken belief that one factor causes another, often ignoring the possibility of a common cause or reverse causation.
THE IDEA
EPIPHENOMENA
The Soviet-Harvard illusion—lecturing birds on flying and believing that the lecture is what produces their skills—belongs to a broader class of causal illusions called epiphenomena. The name captures a simple mistake: when you spend time on the bridge of a ship or in the coxswain’s station with a large compass in front of you, it is easy to develop the impression that the compass steers the ship, rather than merely reflecting its direction. An epiphenomenon occurs when two things reliably appear together, so the mind leaps to a causal link—often the one that feels most plausible within a given culture or news cycle.
Philosophers since Hume and modern psychologists have studied this under the umbrella of epiphenomenalism, the illusion that one thing causes another when the relationship may be merely coincidental, reversed, or non-existent. It is a cousin of the illusion of control. For instance, we rarely think that short hair causes boys to be boys, or that wearing a tie makes someone a businessman. Yet it is easy to fall into similar traps in domains where the causal chains are less visible. Wealthy, developed countries display high levels of academic research, leading many to assume uncritically that research is the generator of wealth—while the lecturing-birds effect suggests the opposite direction or a common hidden driver.
The same pattern corrupts institutional decision-making. From the standpoint of an organization, the existence of a risk manager has less to do with actual risk reduction than with the impression of risk reduction. The question becomes: does the compass move the boat? By “watching” your risks, are you effectively reducing them, or are you merely giving yourself the feeling that you are doing your duty? Are you a genuine decision-maker, or just an observing press officer? Such illusion of control can be deeply harmful because it fuels action and then justifies it retrospectively. A dictator—just like a government—feels indispensable because the alternative is hidden or obscured by special interests. The Federal Reserve, for example, can wreak havoc on the economy yet remain convinced of its effectiveness because people fear the unknown alternative.
One can even learn to profit from this blindness while remaining aware of it. Some approaches emphasize recognizing that markets and social systems are full of participants who mistake noise for signal, epiphenomena for cause. The paradox is then personal: to succeed as a trader who exploits randomness, you need most people to remain fools of randomness, but you also need a minority intelligent enough to value your methods. The real risk in such a career is becoming too successful—if everyone learned to see past the illusions, the edge would disappear. Recognizing an epiphenomenon does not dissolve it; it only changes who is steering and who is drifting with the compass.
When to use it
In business, mistaking employee satisfaction survey scores as the cause of productivity gains, when both may be driven by a third factor like strong leadership.
In economics, assuming that increased university enrollment directly causes economic growth, ignoring reverse causation or common factors like institutional quality.
In health, believing that a specific diet directly causes longevity, while the diet may be a proxy for other healthy behaviors or socioeconomic status.
In politics, a dictator or government feeling indispensable because the absence of their rule is not observable, similar to the Federal Reserve's perceived effectiveness despite potential negative impacts.
Corporate risk management: A board mandates dashboards and reports, but the organization makes no strategic adjustments based on them.
Personal investing: An individual tracks their portfolio daily and makes small trades, believing this vigilance protects against losses, while long-term returns are unaffected.
Healthcare: Hospitals implement patient safety checklists that become a procedural box-ticking exercise, with no measurable reduction in adverse events.
Government policy: Agencies create oversight committees that produce reports but lack enforcement power, giving the public a false sense of accountability.
FROM THEORY TO EVERYDAY LIFE
In practice
The Soviet-Harvard Illusion
Lecturing birds on flying and believing that the lecture is the cause of their flying skills. An epiphenomenon can lead to the false belief that a correlated activity (lecturing) causes the outcome (flying).
The Compass on a Ship
Observing a compass on a ship and developing the impression that the compass directs the ship, when in fact it only reflects the ship's direction. This is a classic epiphenomenon where a measurement is mistaken for a cause.
Risk Manager as Compass Watcher
A company hires a risk manager who produces detailed reports on potential threats, but the company’s actual risk exposure remains unchanged. The manager’s presence creates the illusion of safety, much like a compass that seems to steer the boat but has no causal effect on its direction.
Author's Personal Paradox
The author, a professional trader, relies on others being 'fools of randomness' to profit, but also needs a minority who recognize his methods to hire him. His success would paradoxically eliminate the very market inefficiencies he exploits.
A MOMENT TO REFLECT
Put it to work.
Think of a situation in your life where you assumed that a correlation implied causation. How could you test whether the relationship is actually causal?
Identify an epiphenomenon in the news or in your industry where a metric is often mistaken for the driver of success. What might be the true causal factors?
How might the 'compass illusion' apply in data-driven decision making? What steps can you take to avoid mistaking a correlated indicator for a cause?
In your work or personal life, where do you engage in monitoring or risk assessment that provides comfort rather than real change?
How can you distinguish between actions that actually reduce risk and those that merely give the appearance of doing so?
What would happen if you stopped a particular risk management practice—would the outcomes change, or would only your feelings of control change?
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)
- Antifragile (Nassim Nicholas Taleb)