fundamental attribution errorHumans tend to explain outcomes in terms of internal factors such as personality abilities as opposed to the external situation. When one basketball player shoots free throws in a poorly-lighted gym and another in a well-lighted gym, we tend to attribute the better shooting of the second player to inherent ability rather than to external factors.

This tendency to ignore context and attribute an individual’s success (or failure) to intrinsic qualities is what scientists call “fundamental attribution error.” In business, this is the tendency to attribute all or most of a company’s success to its CEO and give insufficient credit to the team he or she lead or an underlying economic upturn. We are often not as good as we think in bull markets or as bad as we fear in bear markets.

“Observers pay selective attention to the most accessible and easily processed information and fail to process less obvious, yet vitally important, contextual cues. Internal attributions are made because people are more likely to notice and focus on the actor’s behavior than other external aspects of the situation (Forgas, 1998). Although the attributions a person makes using this method may not be accurate this simple attribution strategy saves the observer considerable time and effort.” (psychwiki.com)

People like clear narratives and prefer simple story lines: the good guys wear white hats, the bad guys wear black hats. The world is rarely that simple.

Closing quotes:

“Never confuse a bull market with brilliance.”

“Behavior tends to engulf the field (i.e. stand out) and perceivers tend to attribute behavior to whatever grabs their attention” ” Fritz Heider, psychologist 1998; 1896–1998