The narrative fallacy
We impose causal stories on random sequences, manufacturing false understanding.
The mind hates noise. Given a sequence of events, it constructs a story that explains them, even when there isn't one. The story feels true because it's coherent, not because it's accurate. Most history is heavily narrative-fallacy contaminated.
The bias produces a steady stream of just-so stories about why this company succeeded, why that strategy failed, why some person became rich. Most of the stories explain randomness with retrospective causation.
For operators, the antidote is to ask, when reading any business success story: would the same factors, applied to a company that failed, also be available? If yes, the story is mostly narrative fallacy.
Examples in the wild
Business biographies are saturated with narrative fallacy. The successful founder's habits, philosophy, and decisions get credited for the outcome. The thousand similar founders who did similar things and failed don't get books.
Daily financial news is almost entirely narrative fallacy. The market went up today because of X, down today because of Y. Both stories are constructed after the fact to match the price movement.
Most personal life stories are narrative fallacies in progress. We've selected the events that fit the narrative and forgotten the ones that didn't.
The narrative fallacy is one of the mental models we apply through real cases inside the Pareto MBA — a part-time program for professionals who want to think clearly about business.