What bias leads to a distorted interpretation of information due to prior success or knowledge?

The chosen answer is tied to the concept of the illusion of control, which reflects the tendency for individuals to overestimate their influence over events, typically in scenarios where chance plays a significant role. This bias can lead to a distorted interpretation of outcomes based on past successes or pre-existing knowledge, resulting in a skewed perception of one’s ability to influence future events.

When individuals experience success, they may erroneously attribute it to their skills rather than the external factors that contributed to that success. This overconfidence can cause them to misinterpret new information or outcomes, believing they can replicate or control the situation in the same manner. It creates a feedback loop where prior successes reinforce the belief that they have more control than they actually do, thus distorting their evaluation of current and future situations.

Understanding the illusion of control is crucial in investment and decision-making contexts. It helps to remain aware of one's biases and the potential for overconfidence, encouraging a more objective analysis of situations that account for randomness and external influences.