Texas Sharpshooter Fallacy

AAA

DEFINITION of 'Texas Sharpshooter Fallacy'

An analysis of outcomes out of context that can give the illusion of causation rather than attributing the outcomes to chance. The Texas sharpshooter fallacy fails to take randomness into account when determining cause and effect, instead emphasizing how outcomes are similar rather than how they are different.

The Texas sharpshooter fallacy takes its name from a gunman who shoots at a side of a barn, only later to draw targets around a cluster of points that were hit. The gunman didn’t aim for the target specifically (instead aiming for the barn), but outsiders might believe that he meant to hit the target.

INVESTOPEDIA EXPLAINS 'Texas Sharpshooter Fallacy'

The fallacy outlines how people can ignore randomness when determining whether results are meaningful. Investors may fall prey to the Texas sharpshooter fallacy when evaluating portfolio managers. By focusing on trades and strategies that a manager got right, the investor may inadvertently disregard what the manager didn’t do well. For example, the clients of a portfolio manager may have seen positive returns during an economic crisis, which may make the manager seem like someone who predicted the downturn.

Another example of the fallacy is an entrepreneur who creates many failed businesses, but a single successful one. The businessman touts his entrepreneurial capabilities while de-emphasizing that he had many failed attempts. This can give the false impression that the businessman was always successful, while ignoring the many times he was not.

RELATED TERMS
  1. Lump Of Labor Fallacy

    The assumption that the quantity of labor required in an overall ...
  2. Gambler's Fallacy

    When an individual erroneously believes that the onset of a certain ...
  3. Tianjin, China

    A definition of Tianjin, China.
  4. Economic Justice

    Economic justice is a component of social justice. It's a set ...
  5. Hong Kong SAR, China

    Hong Kong is a financial and business center in China.
  6. Macau SAR, China

    Definition of Macau SAR, China
Related Articles
  1. Investing

    What is the broken window fallacy?

  2. What is GNP?
    Economics

    What's the GNP?

  3. What's a monopoly?
    Economics

    How a Monopoly Works

  4. Unemployment occurs when a person who is actively searching for employment is unable to find work.
    Economics

    What "Unemployment" Really Means

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center