I don’t have a lot to add to this excellent post about the narrative fallacy at lesswrong.  Here are some great excerpts, to convince you to go read the whole thing:

Essentially, the narrative fallacy is our tendency to turn everything we see into a story – a linear chain of cause and effect, with a beginning and an end.

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Our brains are engines designed to analyze the environment, pick out the important parts, and use those to extrapolate into the future.

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This tendency can be seen in a variety of lower level biases. For instance, the availability heuristic causes us to make predictions and inferences based on what most quickly comes to mind – what’s most easily remembered. Hindsight bias causes us to interpret past events as obviously and inevitably causing future ones. Consistency bias causes us to reinterpret past events and behaviors to be consistent with new information. Confirmation bias causes us to only look for data to support the conclusions we’ve already arrived at. There’s also our tendency to engage in rationalization, and create post-hoc explanations for our behavior. They all have the effect of of molding, shaping, and simplifying events into a kind of linear narrative, ignoring any contradiction, complexity, and general messiness.