Following are the grades (out of 10) of five students in three exams they did in a year.
| Exam 1 (Jan) | Exam 2 (May) | Exam 3 (Sept) | |
| Student 1 | 4 | 5 | 7 |
| Student 2 | 3 | 4 | 5 |
| Student 3 | 6 | 3 | 6 |
| Student 4 | 5 | 7 | 6 |
| Student 5 | 7 | 5 | 3 |
Here are some of the reasons why they performed in that fashion.
The analysis
Student 1 is the star of the class. She comes from a middle-class family and is very hard-working and strategic. She had to overcome a series of adverse events in the year, but her perseverance earned her good grades.
Student 2 is an average one who comes from a financially average family, often distracted due to his habit of playing video games. Despite the backlashes, his hard work helped him to overcome the final hurdle.
Student 3 is the most confident young man, but at times overconfident, and that proved his downfall in the middle of the year. But he bounced back toward the end to show his true talent. Form may be temporary, but class is permanent.
Student 4 is intelligent but inconsistent. He was a bit unlucky earlier this year due to family issues, but he overcame those and became a decent performer.
Student 5 comes from an average family, and he lost his focus due to various family issues, including a breakup.
The narrative fallacy
The situation mentioned above is an example of what is known as the narrative fallacy. In reality, the scores you have seen above are the outcome of a coin-flipping exercise, and the points scored are the number of heads in the game. You may observe a few standard things within all those narratives that followed. They each present a compelling story. You will never see mentions of randomness or luck in it. They satisfy the audience’s thirst for the cause and effect of the event, i.e., the exam results. They all ignore things that didn’t fall into the storyline. The following table lists each student’s circumstances, and the highlighted words denote what has been cherry-picked by the author to tell her tale.
| Student 1 | Confident, Financially OK, Video games, Hard working, Break up, Strategic, Inconsistent, Average |
| Student 2 | Confident, Financially OK, Video games, Hard working, Break up, Strategic, Inconsistent, Average |
| Student 3 | Confident, Financially OK, Video games, Hard working, Break up, Strategic, Inconsistent, Average |
| Student 4 | Confident, Financially OK, Video games, Hard working, Break up, Strategic, Inconsistent, Average |
| Student 5 | Confident, Financially OK, Video games, Hard working, Break up, Strategic, Inconsistent, Average |
The investment gurus
The media is full of examples of narrative fallacies. Two classes of experts lead the table, namely the financial analysts and sports pundits.
