What is the point of this silly exercise? It is intended to show that we often attribute abilities or the lack of abilities to people when, in fact, their perfor- mances may be statistically insignificant. When people invest with stockbro- kers, they tend to shift to a new broker when they lose money. When they hit on a broker who earns them money, they stay and praise this broker’s abili- ties. In fact, some financial advisers seem to be better than others—they have a long history of sound financial advice—but the financial community is, in many ways, like the truckload of pennies we have just examined. There are many brokers giving all sorts of different advice and, by chance alone, some of them are bound to give good advice. Furthermore, some of them are bound to have runs of success, just as some of the pennies dumped from the truck will have long strings of coming up heads. Thus, in some cases, what appears to be brilliance in predicting stock prices may be nothing more than a run of statistically expected good luck.
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