Do you know how many people dropped out of college to start their own businesses in an effort to emulate Mark Zuckerberg’s success and failed? I don’t know either because no one bothered to tell their stories.
Traditional and social media are filled with the success stories of Elons, Marks, Bills, and Steves — all people who defied the norms but never faced the expected consequences. Since this is all we read about, we assume success is easier to attain than it is.
This is survivorship bias.
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Survivorship bias 101
Survivorship bias is a form of selection bias that occurs when we focus on people or companies that passed a selection process while overlooking those that did not. We assume causation instead of correlation because we’re looking at incomplete data sets.
The most famous example of survivorship bias comes from the planes returning from missions during World War II. Military experts’ knee-jerk reflex was to reinforce the places where the planes got hit.
It was mathematician Abraham Wald who spotted the fallacy: the returning planes made it home even if they were hit, so consolidating the hit spots is not a priority. Instead, they should infer data about non-returning planes. Wald realized they needed to reinforce the spots where the returning planes were not hit — clearly, if those spots had been hit, the aircrafts wouldn’t have made it back home.
This is an example of surviving survivorship bias. But more often than not we fall prey to it:
- Ronaldo and Messi are famous football players who make millions. True, but very few football players get to that level. Most of them never get selected to play for a “big” team.
- Mark Zuckerberg and Bill Gates dropped out of college and built empires. Should I drop out of college to succeed? Please don’t: only 8% of CEOs lack a college degree.
- Testimonials sound attractive and might get you to buy. But remember that unhappy clients are never asked for testimonials.
Success stories are inspiring, but they also cause us to be overly optimistic and to look for causes where nothing but sheer luck exists.
Cognitive shortcuts skew our understanding of cause and effect
By focusing on the winners alone, we fail to account for base rates. In statistics, base rates are the probability of a certain event happening. For instance, the probability of being struck by lightning is 1 in 12,000 or 0.008333333333%.
You can skew this number by calculating this probability for, say, a single July week in that one state that experienced an abnormal number of storms. That percentage would increase massively.
However, that would also mean that your initial premise is skewed: you’d be mistaking an exception for the rule. This is exactly what’s happening when we mistake success stories for the norm.
They are the exact opposite: anomalies at the end of the distribution curve. They did not succeed because they defied the norms. They succeeded in spite of that. No causation here.
This quote says it best:
“For every wealthy start-up founder, there are 100 other entrepreneurs who end up with only a cluttered garage.” David Cowan of Bessemer Venture Partners for Scientific American.
The numbers support it: 90% of startups fail.
These starts are easy to find. Failure stories, on the other hand, are not — even if you explicitly look for them:
Look for failure stories and all you’ll find are more success stories. This makes it easy to skip the critical thinking and assume that success is more probable than it really is. Our scorn of the abstract leads us to see causation where only sheer coincidence exists.
Survivorship bias endangers your own survival
Distribution curve anomalies, or the success stories we are so fond of, lead us to mistakenly think that ramen noodles are a signal of impending prosperity. Naturally, the temptation to replicate these narratives on the same thin scaffolding of empty ramen cups and grind is a mere cognitive misstep away.
Truth be told, success stories have very little to teach us.
Yes, they can be inspirational — even aspirational. But when we try to replicate them we ignore the 90% chance of failure, which means that we ignore all the probable causes of failure. We can’t mitigate the risks we’re not aware of.
Worse yet, survivorship bias comes with a huge toll on our mental health. When all you see around you are success stories, it’s easy to think you’re one of the very few who screwed up and couldn’t “make it”. It’s the surest way to turn self-esteem into self-devaluation.
In turn, this lowers your chances of success even further.
How to survive survivorship bias and make better decisions
As children, we learn through stories and by mimicking adults’ behavior. As grown-ups, recognizing survivorship bias means going against our primal instincts of mimicking the stories we like best.
Luckily, as grown-ups, we also develop a little thing called critical thinking. This is your tool to spot survivorship bias and prevent it from interfering with your decision-making.
Instead of trying to replicate success stories, do this:
- Understand there’s a 90% chance you’ll fail. Blunt as that may seem, once you get comfortable with it, you’ll increase your chances of success because you’ll be warier of the inherent risks in any business venture.
- Look for the untold tales. Yes, this requires more effort — you need to dig deeper for them. But this is where valuable teachings lie hidden. Understand why some founders failed and dissect their mistakes so you don’t repeat them. Remember: the smartest people learn from others’ mistakes.
- Take your blinders off. Always look for the full data sets and base rates.
- Hindsight isn’t always 20-20. Some of the worst decisions can turn out well. In retrospect, you may think they were the best decisions you ever made just because, against all odds, they turned out well. Understand that the likelihood of this happening again is incredibly tiny.
- Always have a clear map of the risks you need to mitigate. Call it a SWOT analysis, call it a risk assessment, call it anything you please. Just make sure you know what can impact your business and take steps to mitigate those risks before they happen. A new pandemic, an economic crisis, a new competitor in your industry — how would these affect your bottom line?
- Test your hypothesis before you go all in. The ConvertKit Grow Your Audience Challenge is a good way to see if your idea can gather a critical mass of supporters. It’s free and open to anyone.
A final caveat: understanding survivorship bias is not an excuse to swap action for inaction. It’s a cognitive asset to help you make better decisions. It’s an appeal to look for complete data sets aka the foundation of good decision-making.
That’s it from me today! Thank you for joining me in exploring another unpopular and yet so necessary take.
See you next Thursday at the same time in the same inbox (yours).
Here to make you think,
Adriana
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