Taxi-Cab English and Causality
The bias of perceiving causal relationships between unrelated events, leading to superstitious behaviors even among rational professionals. This is illustrated by a trader who unconsciously repeated a specific entrance and tie after a profitable day, attributing the outcome to these arbitrary actions.
THE IDEA
The Story
The author recounts a personal experience as a young trader in New York. After a particularly profitable day, he noticed that he had taken a specific entrance to his office building (Fifty-second Street) and worn a particular tie with coffee stains. The next day, he found himself instructing the new cab driver to drop him at the same entrance, and later realized he was wearing the same tie again. He was disturbed to discover that he had subconsciously attributed his previous day's success to these superficial details, revealing a superstition that contradicted his professional identity as a rational probabilist.
The Bias
This behavior is a manifestation of the cognitive bias where people infer causality from mere coincidence, often driven by pattern recognition and the need for control. The author calls such associations "gamblers' ticks" — small, unconscious rituals that arise from perceived statistical connections between actions and outcomes, even when the sample size is insufficient (e.g., a single instance). He gives further examples: wearing glasses that are not needed because he once had a good trading day after starting to wear them, and a colleague who consulted a fortune teller before taking large trading positions. The bias is most prominent in environments with high randomness, such as gambling and financial markets, where people seek to impose order on randomness.
Key Concepts
- Superstitious Behavior: Unconscious rituals believed to influence outcomes.
- Illusory Correlation: Seeing associations between variables that are not actually related.
- Heuristic: The mental shortcut of pattern recognition that often leads to false causality.
- Gambler's Fallacy: Distinction — this bias is about attributing causality to specific actions, not about misperceiving probabilities in independent events.
Relevance
This bias is particularly dangerous for professionals like traders, investors, and analysts who rely on probabilistic reasoning. It can lead to repeated, irrational behaviors that ignore statistical evidence, undermining decision quality over time.
When to use it
An investor who had a successful trade after drinking a particular coffee repeats that ritual daily, believing it contributes to future profits.
A trader who uses a specific order-entry sequence after a winning day, unconsciously linking the sequence to the positive outcome.
A job applicant who wears the same outfit to interviews after an initial success, attributing the outcome to clothing rather than preparation or fit.
A manager who holds meetings in the same conference room after a productive session, assuming the location caused the productivity.
FROM THEORY TO EVERYDAY LIFE
In practice
The Taxi Driver and the Entrance
After a highly profitable trading day, the author realized he had been dropped off at Fifty-second Street instead of the usual Fifty-third. The next day, he unconsciously instructed the driver to take him to the same offbeat entrance, revealing a belief that the entrance was causally linked to his profits.
Glasses and Performance
The author started wearing glasses after his income increased following a diagnosis of slight nearsightedness, even though the glasses were not necessary. He kept them on, acting as if the glasses enhanced performance, despite knowing the association was spurious.
The Fortune-Telling Colleague
A highly intelligent colleague would consult a fortune teller before taking large trading positions, treating the fortune teller's advice as a causal factor for success, even while working in a field that demands probabilistic rigor.
A MOMENT TO REFLECT
Put it to work.
Recall a time when you repeated a specific action or ritual because of a previous positive outcome, even though there was no logical connection. What was the action, and why did you repeat it?
How might the bias of attributing causality to coincidences affect professional decision-making in fields like investing, management, or medicine?
Identify any 'gamblers' ticks' in your own life—small superstitions or habits that you follow without evidence. How can you test whether they actually influence the outcomes you care about?
CONTINUE THE CONVERSATION
Source texts
- Fooled by Randomness The Hidden Role of Chance in the Markets and in Life (Nassim Nicholas Taleb)