STREET DOGS: Hard work
It’s not about how hard anyone works
The conjunction fallacy (also known as the Linda problem) occurs when it is assumed that specific conditions are more probable than a single general one. "We could call it the ‘work ethic’ fallacy," says Mark Rzepczynski, an economist at Lakewood Partners, in his review of a recent paper by JB Heaton and Ginger Pennington that looks at whether the persistence of active management relative to passive (in spite of their underperformance) was the result of investors falling prey to the conjunction fallacy by matching hard work with performance. "We want to believe that hard work will generate better returns. It could also be thought of as a ‘just world’ view. Investors believe that higher returns are the just rewards for hard work. Certainly there may be a ‘peace of mind’ view that managers who are working hard will better serve investors and generate higher returns and oversee successful portfolio performance. This is all consistent with the ‘feeling as information’ theory in psycholo...
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