What Is Survivorship Bias?
Mutual fund performance shows survivorship bias. Everyday life is full of examples of survivorship bias when we give more weight to stories about people or approaches that ended positively. The media and the internet allow the good news to spread quickly and to a wide audience. There will always be someone who tried something similar and failed for every success story like this one.
The survivorship bias describes as a cognitive shortcoming that causes you to overgeneralize the most readily available facts. Survivorship bias ignores the unsuccessful selection process
They praised Triumphs but ignored the failures.
Here are four instances of survivorship bias
The logical fallacy of survivorship bias or survivor bias has played, or can potentially play, a significant role in many different areas, such as:
Firstly, the business world is affected by the phenomenon known as “survivorship bias,” which is a key factor when discussing the success of businesses such as startups and mutual funds. A mutual fund is a portfolio of stocks, bonds, or other securities monitored by a professional money manager. However, during the recession, several mutual funds likely closed due to poor performance.
Bill Gates and Microsoft, Steve Jobs and Apple, and Mark Zuckerberg and Facebook may be examples of how to launch a successful business in MBA and other entrepreneur programs. But this training doesn’t take into account the tens of thousands of failed companies that came before and after the ones that succeeded.
The phrase “They don’t produce things like they used to” is a typical American English expression referring to manufactured items. Furniture, cars, and equipment were of higher quality in the past than today. It illustrates survivorship bias because all the historical products shown here are high-quality ones that have endured to the present day.
In contrast, all the poor-quality ones have long since been replaced. That is to say, today’s market is devoid of anything of truly high quality, while brand-new items are still widely available.
3. Disability portrayals
Many media representations of individuals with disabilities exhibit survivorship bias in that they highlight instances where disabled people outperformed their non-disabled peers or where their fortunes improved. While some of these accounts may be encouraging, most people who face daily challenges due to their disability go unmentioned. Some media outlets may present a rosy picture of people with impairments, giving the impression that they don’t require special treatment.
4. Researching WWII planes
The research of Columbia University statistician at the Statistical Research Group, Abraham Wald on World War II bombers to determine the best locations for reinforcement provides a classic illustration of survivorship bias.
His crew reviewed all the bomber data and located the plane’s most damaged regions. Wald saw that they were engaging in survivorship bias and decided against recommending those areas for reinforcement.
As Wald pointed out, these were the sites where planes could take heavy fire from the enemy and yet make it back, but aircraft that hit elsewhere usually didn’t make it back alive. The improved accuracy of his team’s forecasts and the lives they saved resulted from their decision to send reinforcements to areas underrepresented in data from returned flights.
What Causes Survivorship Bias?
Every day, survival bias manifests itself in subtle ways. The preference would have already influenced many of your choices, even if we didn’t realize it.
1. Successful people rise early
Many online publications discuss when successful people wake up. Richard Branson, Donald Trump, The Rock, etc., rise at 5 AM. Have you seen successful early risers? Mark Zuckerberg, Warren Buffet, and Jeff Bezos don’t wake up before 7. You don’t need to sleep. Survivorship bias occurs when you wake up early because you think it will make you successful.
2. Social media influence
Networking. You see fancy updates on Facebook and Instagram. A traveler in Thailand posts on life’s beauty. Another person describes a 5-star buffet—an old acquaintance skydives. You hate your humdrum life. You only hear nice stories from your buddies.
On another day, the same people would have traveled in peak traffic, eaten a salad for lunch, and napped off after work. No one will share or mention it on social media.
3. Successful entrepreneurship
Successful entrepreneurs. You’ve heard corporate rags-to-riches stories. You dream of quitting your work to start your own business. You think if you take a big risk like a successful entrepreneur, you’ll succeed too. You don’t know the story of many entrepreneurs who failed and returned to their regular occupations. People have climbed the career ladder and made millions.
4. Imitate success
To learn their secrets, you read biographies of John D. Rockefeller, C. Vanderbilt, Henry Ford, and Benjamin Franklin. You try their ideas and methods but fail. You didn’t consider generation, geography, technology, present vs. prior market, etc. Many of the tactics still work. You won’t succeed by copying others.
Here are techniques to reduce survivorship bias.
Only awareness can prevent survivorship bias. Knowing your mind can confine your thinking solves half the problem. When your mind urges you to base a judgment on one external example, pause and think. “Am I considering everything?”
1. Examine multiple cases
Survivorship bias leads to a rapid choice of one success story. Don’t hurry. Check your assumptions with examples. Cases and examples aren’t always easy to locate. Ask previous participants for advice. Using the internet. If you can’t find data points, use social media. Join relevant groups, network, and ask questions. People are usually helpful. When you’re humble and open-minded, you can easily gather information. Ask.
2. Consider adverse situations
Look for failures when you encounter a successful idea or business. If others in your city successfully launch a restaurant, look for similar shortcomings. Internet searches rarely turn up bad or failure cases. No media will cover a loss because nobody loves it. You must search for them gather all the data and learn from others.
3. Consider other things
Timing, opportunity, and market can affect an idea’s success. Malcolm Gladwell discusses in Outliers how successful people were lucky.
Fourteen of history’s richest persons were born in the 1860s or 1870s. 1953-1956 produced many IT entrepreneurs. Industrialization and technology boomed then. Luck, hard effort, and talent led to success.
In the early 1900s, babies experienced the flu, World Wars, and the Great Depression. No one takes away the entrepreneurs’ hard work, inventiveness, and effort. They probably wouldn’t have been as successful if they had done the same thing ten years earlier.
Conditions favor your achievement. Please do not use it to avoid hard effort. You must have a work ethic. You must also be careful not to repeat past success stories. Avoid solitary successful examples and dig deeper. More instances viewed means fewer mistakes and greater results.
Keep your eyes and mind open. Don’t sway yourself.