Today, we will continue on a series of articles on common mental mistakes that we often make. Committing mental mistakes will result in the degradation of the quality of our thinking, which for investors, can lead to serious financial losses. We will compile this series of articles in one of the Common mental pitfalls that leads you astray (in Popular Topics) for your convenient reference.

One of these common mental mistakes is Lazy Induction.

First, what is induction? According to the Encarta World Dictionary, one of the meanings of induction is the

… generalization based on observed instances, or the making of such generalizations, in the usual working method of scientists

Inductive logic is one of the valid tools of reasoning. But it produces fallacious conclusions when we apply subconscious mental shortcuts that bring us to an extreme in inductive reasoning. We will call that Lazy Induction. In the book, The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb describes this flaw as

We focus on preselected segments of the seen and generalise from it to the unseen…

The trouble starts when the sample that we used for our observations is drawn from our own personal bias. Then, from the observations of the biased sample, we make generalisations based on our flawed observations. Lazy Induction allows us to prove anything that we want to be true. All we have to do is to pick a sample of observations that conforms to our bias and then generalise from there.

Here is an example of Lazy Induction:

1. Confusing absence of evidence for evidence of absence– For example, if we find no evidence that cancer cells exists in a patient’s skin, does it mean that this is evidence that the patient is completely cancer-free?

Fortunately, it is very easy to prove the invalidity of flawed conclusion that is produced by Lazy Induction. All we have to do is to find a negative example. In the above-mentioned example, to prove that the conclusion of the patient being completely cancer-free is false, all we have to do is to find one cancer cell.

Finally, if you find any real-life examples of Lazy Induction, feel free leave a comment and share it with the rest of us.

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