Texas Sharpshooter Fallacy


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.

BREAKING DOWN '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.

  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. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
  4. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  5. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  6. Factor Market

    A marketplace for the services of a factor of production.
Related Articles
  1. Professionals

    5 Career-Killing Facebook Mistakes

    Facebook might be a great way to show off those cute pics from your vacation -- but your page isn’t so great if it hurts your career.
  2. Economics

    Understanding Income Inequality

    Income inequality refers to the uneven distribution of income across a single economy.
  3. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  4. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  5. Economics

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  6. Economics

    What is Economic Rent?

    Economic rent typically occurs when a product, service or property is in short supply, but demand is high.
  7. Economics

    Oil Is Cheaper Than Bread In Venezuela...The Country Is In Chaos

    Venezuela is floundering, and the story has more to do with just the falling price of oil.
  8. Economics

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  9. Economics

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  10. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  1. What is the broken window fallacy?

    The broken window fallacy was first expressed by the great French economist, Frederic Bastiat. Bastiat used the parable of ... Read Full Answer >>
  2. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  3. Is Mexico an emerging market economy?

    Mexico meets all the criteria of an emerging market economy. The country's gross domestic product, or GDP, per capita beats ... Read Full Answer >>
  4. Is Argentina a developed country?

    Argentina is not a developed country. It has one of the strongest economies in South America or Central America and ranks ... Read Full Answer >>
  5. Is Brazil a developed country?

    Brazil is not a developed country. Though it has the largest economy in South America or Central America, Brazil is still ... Read Full Answer >>
  6. What is the difference between marginal utility and marginal value?

    Depending on the context, marginal utility and marginal value can describe the same thing. The key word for each is "marginal," ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!