Narrative Fallacy
The Narrative Fallacy is a cognitive bias where individuals construct flawed, oversimplified stories to explain a series of complex or random facts. Popularized by Nassim Nicholas Taleb in 2007, this mental model explains our biological need to "compress" information into causal chains, leading us to underestimate the role of luck and overestimate our ability to predict the future. Understanding the Narrative Fallacy allows investors, historians, and leaders to avoid the "illusion of understanding" and build more robust strategies that account for the chaos of reality.