Survivorship Bias - Deepstash

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Survivorship Bias

Survivorship Bias

Survivorship bias is a logical error that twists our understanding of the world and leads to a wrong understanding of cause and effect.

We fall into survivorship bias when we assume that success stories tell the entire story of a product/business, while we don't properly consider past failures.

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Survivorship bias leads us to think that coincidence is a correlation. We want the encouragement from survivorship bias so we can believe in our own capabilities, but it results in an inflated idea of how people become successful.

Statistics of market performance can be distorted when they focus on the rare successes while excluding companies which collapse.

When we only pay attention to the exception above the normal, we end up misunderstanding reality. While there is much to learn from the anomalies, it would be a mistake to expect the same results from doing the same things. 

We can overcome survivorship bias by considering the things that started on the same path but didn't make it.  Try and figure out why they failed. If you're going to do something, make sure you are fully informed.

Successful entrepreneurs teach us very little. We would do better by analyzing the causes of failure first and then the successes.

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