Page 191 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

But astrophysics is a field of precession. It isn’t impacted by the vagaries of
human behavior and emotions, like finance is. Business, economics, and
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investing, are fields of uncertainty, overwhelmingly driven by decisions that

can’t easily be explained with clean formulas, like a trip to Pluto can. But
we desperately want it to be like a trip to Pluto, because the idea of a NASA
engineer being in 99.99998% control of an outcome is beautiful and
comforting. It’s so comforting that we’re tempted to tell ourselves stories
about how much control we have in other parts of our life, like money.

Kahneman once laid out the path these stories take:

When planning we focus on what we want to do and can do, neglecting the
plans and skills of others whose decisions might affect our outcomes.

Both in explaining the past and in predicting the future, we focus on the
causal role of skill and neglect the role of luck.

We focus on what we know and neglect what we do not know, which makes
us overly confident in our beliefs.

He described how this impacts businesses:

I have had several occasions to ask founders and participants in innovative

start-ups a question: To what extent will the outcome of your effort depend
on what you do in your firm? This is evidently an easy question; the answer
comes quickly and it has never been less than 80%. Even when they are not
sure they will succeed, these bold people think their fate is almost entirely
in their own hands. They are surely wrong: the outcome of a start-up