Judging probability by how closely something resembles a stereotype or prototype — ignoring base rates in favour of surface similarity.
Deeper Explanation
An investor who sees a company with strong growth, charismatic founder, and exciting technology may categorise it as "the next Amazon" — ignoring the base rate that most such companies fail to sustain their growth. Representativeness causes investors to pay extreme prices for businesses that look like winners, and to dismiss businesses that look like losers even when the fundamental analysis is favourable. The correction is to start with base rates: before asking "how is this similar to past successes?", ask "what fraction of companies in this situation have actually succeeded?"
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