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Survivorship Bias: The Tale of Forgotten Failures
Against the Odds
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.
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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.
Against the Odds
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.
Cause and Effect
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.
The fact is that success is never guaranteed. It does not mean that we shouldn't try, just that we should have a realistic understanding.
Survivorship Bias in Business
Statistics of market performance can be distorted when they focus on the rare successes while excluding companies which collapse.
Business books laud the rule-breakers who ignore conventional advice and still create profitable enterprises. However, many misfit billionaires succeed in spite of their unusual choices, not because of them.
Learning From Failure
Successful entrepreneurs teach us very little. We would do better by analyzing the causes of failure first and then the successes.
The huge failure rate for start-ups is often hidden. We will do well to recognize that these failures hold important information.
The only real similarity in unusual success stories is luck.
Consider What You Don’t See
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.
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Luck is a perceptual bias
In other people, we focus on the successful result, not the struggle and growth experience they endured to reach it, while in ourselves, all we’re aware of is the struggle we endure and n...
We control our luck
... to a certain extent. We may not directly affect major opportunities of our life at any given moment (like finding oil on our property), but we can indirectly influence how many opportunities spring up and the ferocity with which we pursue them.
We control our luck
... to a certain extent. We may not directly affect major opportunities of our life at any given moment (like finding oil on our property), but we can indirectly influence how many opportunities spring up and the ferocity with which we pursue them.
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Key Ideas
Seven universal plots
There are only seven plots that are so fundamental to the way we tell stories that every storyteller uses one of them: Overcoming Monsters, Rags to Riches, The Quest, Voyage and Return Rebirth,...
Economic history
Looking for a few universal plot patterns reveals things fundamental to how all people think, which are likely to be repeated in the future and relevant to your own situation. This idea also applies to how the economy works.
Economic history can seem complicated because it's part of politics, psychology, sociology, criminology, biology, military, technology, education, finance, etc. But within all that complexity is a lot of similarities.
The lens to look through
- People seem to want the same economic things – security, power, admiration, fulfillment.
- They tend to use the same tactics to acquire those things - work, risk, incentives, persuasion, theft, control.
- They tend to fall for the same flaws pursuing those things - overconfidence, pessimism, underestimating how fast things can change, etc.
Although economic history may seem complicated, there are only a small number of broad story plots throughout the world and throughout time.
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Key Ideas
Loss aversion refers to our tendency to strongly prefer avoiding losses over acquiring gains.
Loss aversion refers to our tendency to strongly prefer avoiding losses over acquiring gains.
Availability Heuristic appears when we assume that the examples coming to mind easily are the most prevalent.
Availability Heuristic appears when we assume that the examples coming to mind easily are the most prevalent.
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