Survivorship Bias

We tend to only remember those who are left standing. We all know the Warren Buffet’s, the Michael Jordan’s or Bill Gates’s of the world for their stories of reaching the top in their fields.

The trouble with this human tendency is that we miss a whole lot when we think this way. Survivorship bias, the tendency for us to focus on the people or things that have “survived’ or passed some sort of threshold and for us to then forget or omit other factors that could have contributed to their success. This concept is highlighted and discussed in great detail in Nassim Taleb’s Fooled by Randomness and AIQ by Nick Polson and James Scott.

You know about Warren Buffet because he’s one of the richest men in the world. But you don’t hear stories about other investors who also invested in hedge funds and failed. There’s far more to Buffet than a few strategies that worked out. There is his work ethic, his upbringing, his genes and a whole lot of randomness or luck. We don’t often see all of this when we look at these people or success stories but it’s there. That’s why it may not always be the best idea to trust 100% of the latest book or article on “choosing the right stocks” or “the 8 things your startup needs to grow big”.

There’s a lot of noise out there and survivorship bias makes it a whole lot louder.