Survivorship Bias in Business - Deepstash

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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.

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.

Learning From Failure

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.

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. 

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.

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.

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