Survivorship Bias: What It Is and How to Avoid Falling Victim to It / ITech content

Contents:

• What is survivorship bias
• The phenomenon of survivorship bias
• How survivorship bias works: examples
• Why you shouldn't believe success stories
• Survivorship bias in business
• How to avoid survivorship bias

A university dropout who becomes a billionaire, smokes three packs a day, and lives to be a hundred years old—a person can be rejected by every music studio, yet still achieve world-famous fame. Often, when making decisions, we rely solely on success stories, which leads to a well-known error—survivorship bias. In this article, we explore the origins of this error and offer strategies to help you avoid it from influencing your choices. Understanding this problem is important for more informed decision-making based on facts, not on random examples of success.

What is survivorship bias?

Survivorship bias is a type of sampling error that occurs when information is available only for one group of subjects, called "survivors," while data on another group, the "lost," is virtually nonexistent. This leads us to analyze only part of the information, ignoring important but less obvious cases. In this context, we can recall Cicero, who first described the essence of survivorship bias. This error can distort our perceptions and decision-making, for example in business or science, as successes are often more prominent than failures, which can create a false impression of the likelihood of success.

Diagoras once visited Samothrace, where a friend asked him an interesting question: "You claim that the gods neglect humans. But haven't you noticed how many tablets in the temple contain images and inscriptions attesting to people who made a vow after safely escaping destruction in stormy seas and arriving at harbor?" Diagoras replied: "Yes, that's true, but it's worth noting that there are no images of those whose ships were swallowed up by the storm and who perished at sea." This conversation raises important questions about the perception of divine intervention and human destiny, focusing on how selective evidence shapes our faith and understanding of the world. Cicero, in his work "On the Nature of the Gods," explores philosophical concepts concerning the divine and its role in human life. He focuses on the various views of the gods presented in philosophical schools such as Stoicism, Epicureanism, and Skepticism. He analyzes the nature of the divine, considering questions about the origins of the gods, their influence on the world and humanity, and how faith and religion shape moral and ethical principles. Human interaction with the gods and the search for harmony between reason and faith are also important themes. This work remains relevant today, as it raises important questions about the essence of faith, the role of religion in human life, and the search for meaning in existence. Cicero masterfully combines philosophical analysis with rhetorical skill, making his work an important source for the study of both ancient philosophy and theology.

Survivorship bias is the tendency to focus exclusively on success stories, which leads to a distorted perception of reality. In this context, examples of failure are often ignored, which can create a false impression of the chances of success. Understanding this bias is important for more objective analysis and decision-making in various fields, including business, investing, and personal development. Recognizing failures and studying the causes of these errors can become key factors in achieving real success.

The Phenomenon of Survivorship Bias

The problem was first identified by the Hungarian mathematician Abraham Wald, who worked in a New York laboratory during World War II. The American military turned to him with an important task - to reduce the losses of US Air Force bombers. Wald developed an approach that would help optimize aircraft protection by analyzing damage to bombers already returning from missions. This study became the basis for further developments in the field of statistics and decision theory.

It was necessary to analyze the damage to aircraft returning from combat missions, To identify critical areas requiring additional armor. Full armoring of the entire aircraft was impossible due to cargo capacity limitations, so it was important to identify the most vulnerable areas requiring protection. This approach would significantly improve the aircraft's survivability and combat mission effectiveness.

The holes on the aircraft were unevenly distributed. The greatest number of damages were located in the fuselage and wings, while the fuel system suffered significantly fewer damages, and the engines suffered only a small number.

The military came to the conclusion that it is necessary to strengthen the protection of the central parts of the fuselage and wings, since It was precisely in these areas that numerous bullet holes were recorded. However, Wald expressed the opposite opinion, emphasizing that aircraft damaged in these areas are usually able to return to base. At the same time, hits to the engine or fuel tank are often fatal. Therefore, he proposed armoring the least damaged areas of returning aircraft. This approach would increase the chances of a successful return of aircraft, even in combat conditions. Abraham Wald proved himself right when placing armor on certain areas of aircraft actually contributed to a reduction in US Air Force losses. He described a cognitive bias in which conclusions are drawn based on incomplete data—successful experiences while ignoring unsuccessful ones. This phenomenon is known as "survivorship bias." Understanding this bias is essential for making more informed decisions in a variety of fields, including the military and business.

How Survivorship Bias Works: Examples

Survivorship bias is ubiquitous, from stories of miraculous rescues of drowning people to the astonishing successes of startups. This phenomenon illustrates how focusing on successful outcomes can distort our perception of reality. We often forget about those who failed to overcome challenges, which leads to incorrect conclusions about the probabilities and chances of success. Understanding survivorship bias is important for adequate risk assessment and making informed decisions in business and life.

During World War I, with the introduction of steel helmets, soldiers began to seek medical attention with head injuries more often. This may create the impression that helmets increase the risk of injury. However, in reality, the situation is quite different. Previously, bullets and shrapnel easily pierced soft headgear, resulting in fatalities, and soldiers had no access to medical care. The introduction of helmets made many wounds that would have been fatal in the past now less serious, leading to an increase in the number of visits to doctors. Thus, steel helmets not only protected soldiers but also contributed to a higher level of trauma treatment.

The introduction of seat belts in cars changed the situation on the roads. A driver wearing a seat belt in an accident that would previously have resulted in a fatality now more often only suffers injuries. This increase in hospital visits has contributed to the belief that seat belts may increase the risk of injury in a car. However, it is important to note that seat belts significantly reduce the likelihood of death and serious injury by protecting drivers and passengers in the event of an accident.

Dolphins are known for their ability to rescue people in distress, especially those involved in shipwrecks. These cases often make news on television and in newspapers. However, their aggressive behavior toward people is less widely discussed. Dolphins are also known for their playful nature and often push objects with their noses, raising questions about how many drowning victims they could push from shore into the ocean. The media, based on survivors' accounts, often portrays dolphins as lifesavers, ignoring instances of these marine mammals displaying aggression. It is important to consider the full range of dolphin behavior to gain a more complete understanding of the interaction between humans and these amazing animals. Some people, when examining old but well-preserved buildings, cars, or other objects, express the opinion, "They used to know how to build or make things, but now they can't." This creates a distorted impression that all the products of the past are stronger and more durable than modern ones. However, it is important to remember that we only see individual surviving examples, not the many buildings and cars that have deteriorated and disappeared over time. Thus, one cannot generalize based on a few successful examples while ignoring the many failures that also occurred in the past.

Listening to hits from the 1960s and 1970s, one might hear the opinion: "There used to be great musicians, but they don't write songs like that anymore." This judgment is erroneous, since the person compares contemporary music to the best works of the past that have stood the test of time, without taking into account the many mediocre songs released during the same era. It is important to remember that every musical era has its strengths and weaknesses, and contemporary music also includes both outstanding and less successful compositions. Comparisons should be more objective to see the full palette of musical creativity.

Why You Shouldn't Believe Success Stories

Survivorship bias occurs in a wide variety of contexts. For example, when discussing the importance of higher education, people like Mark Zuckerberg, Steve Jobs, and Bill Gates are often mentioned. They say, "Look, they dropped out of college and university and became successful." However, this is a clear example of survivorship bias, focusing only on the successful cases, ignoring the many people who were unable to achieve success without a college degree. This highlights the importance of analyzing data and understanding that random successes are not universal. Many famous individuals have achieved success despite not having a college degree. However, it is important to consider that there are many stories of people who left school without significant success and went on to work in fields such as management or sales without founding successful companies. According to statistics, of the 362 richest people in the United States, only 12.2% dropped out of college. This suggests that having a college degree significantly increases the chances of financial success.

In today's world, there are outstanding individuals, such as Jay-Z, Kobe Bryant, and Mark Zuckerberg, who achieved success despite dropping out of college. However, it is important to understand that their path is unique and not a one-size-fits-all solution. Most people do not have the same opportunities and talents, so it is worth considering the importance of education. Education provides essential knowledge and skills that can significantly increase the chances of a successful career. Rather than relying on luck or exceptional circumstances, it is better to invest in your education and professional development.

Scott Galloway is a professor of marketing at the Stern School of Business at New York University. He is an expert in digital marketing and entrepreneurship, and his research focuses on the impact of technology on business and society. Galloway actively shares his knowledge through articles and lectures, and also serves as an analyst and consultant for various companies. His work helps understand how modern trends and innovations affect the market and consumer behavior.

Survivorship bias is often found in success stories. For example, you might hear: "I completed a six-month course and landed a job as a beginner," "I added a year of experience to my resume and have been working as a middle manager for a month," "My grandmother started her own IT company and achieved success at 70." While such stories do exist, we don't know all the nuances and mistakenly conclude: "If they can do it, so can I." We forget about those who weren't able to achieve similar success. This illustrates the importance of critical thinking and recognizing that not all success stories are representative. Actual results depend on many factors, including personal circumstances, the labor market, and the level of competition.

One reason for this is our inability to correctly relate cause and effect. We often think that there is a certain pattern to the stories of successful people: Zuckerberg, Jobs, and Gates dropped out of school and became rich. However, this could be just a coincidence. Their success is not solely due to the fact that they did not complete their education. This is just one of many factors in their life's journey, which does not determine their achievements. It is important to understand that success requires a comprehensive approach that includes not only education, but also many other elements, such as perseverance, innovative thinking, and the ability to adapt to change.

Survivorship Bias in Business

In literature and films about entrepreneurship, you can often find inspiring stories of successful startups that started in a garage and turned into unicorns. This creates the feeling that success is near, and the main thing is to just start a business. However, statistics show a different reality: 90% of startups fail, and only 1% of them achieve significant profits. It is important not only to start, but also to carefully think through a strategy, consider risks, and adapt to changing market conditions. Success in entrepreneurship requires not only an idea, but also perseverance, analysis, and a willingness to constantly learn.

Howard Schultz is the founder of the world-famous Starbucks brand. His success is often portrayed as an overnight achievement, but it stems from years of hard work. Schultz began his career at Starbucks in 1982 as director of retail operations and marketing. After an inspiring trip to Italy, he proposed to the company's owners that they start selling espresso, but was rebuffed. Consequently, Schultz left Starbucks and started his own business. He encountered difficulties: of the 242 investors he approached, 217 rejected his idea. Only two years later, Schultz was able to return to Starbucks, buy the company and turn it into a coffee empire known throughout the world.

By focusing solely on success stories, we may create the illusion that circumstances are often in our favor. However, the reality is much more complex. We often overlook important data about companies that failed and are rarely mentioned in the media. These "failed" projects contain valuable lessons that can help us avoid mistakes and better understand the dynamics of success and failure in business. Understanding the full spectrum of experience, including failures, is vital to forming a realistic picture of entrepreneurship and achieving sustainable success.

Every startup pitch often begins with the statement that ninety-five percent of startups fail. However, we rarely stop to consider the significance of this fact. What lies behind these numbers? What are the reasons for failure, and what can we do to avoid similar mistakes? Understanding these aspects can help entrepreneurs not only improve their chances of success but also better prepare for the challenges they face along the way.

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Stories of billionaires who built large and successful companies often fail to mention that some of them had wealthy parents, met key figures in university who later became their first investors, or that fortunate circumstances played a decisive role in their success. These aspects distort the perception of entrepreneurship and startups, leading to a common survivorship bias. It's important to understand that success in business often depends not only on hard work and talent, but also on external factors that can significantly influence one's career path.

How to Avoid Survivorship Bias

Rarely does anyone consider writing a biography of a businessman who failed, or an actor who, having gone to Hollywood, returned a year later without money and fame. We are interested in stories that inspire and instill confidence in success. This is where the psychological power of survivorship bias and its persistence manifests itself. It is important to realize that success is not a guarantee. Most companies face bankruptcy, and only a few achieve wealth or fame.

Be careful with the advice of successful people. Often, their advice does not take into account individual circumstances and the unique situations we find ourselves in. Each person's success depends on many factors, including personal effort, context, and even luck. Therefore, it is important to analyze advice with critical thinking and adapt it to your needs. Remember that your path to success may differ from others, and it's important to find your own solutions and approaches.

Barnaby James is an experienced investor and the Director of Applied Artificial Intelligence at Google Labs. He plays a key role in the development and implementation of innovative AI solutions that advance technology and improve business processes. His expertise in AI allows him to effectively manage projects and identify new investment opportunities in high-tech startups. Barnaby James actively shares his knowledge and experience, making him a significant figure in the technology and investment fields.

You can learn to overcome survivorship bias by following a few simple rules. First, it's important to understand that it's a cognitive bias that leads to incorrect conclusions based on limited experience. To avoid such mistakes, it's necessary to analyze the broader context and consider information from multiple sources.

Research examples of failures to get a complete picture. Use statistics and data that reflect the real picture, not just successes. It's also important to develop critical thinking, which will allow you to make more informed conclusions.

Make sure your decisions are based on a comprehensive analysis, not just on isolated success stories. This will help you avoid thinking traps and achieve better results in your work.

• Study cognitive biases: forewarned is forearmed. You can start with a Wikipedia article or find an interesting book on the topic.
• If you need to make a choice, try to obtain and consider all available information. For example, when choosing a smartphone, read not only the reviews posted by the manufacturer on its website, but also search for them on forums and in specialized publications. This will help you find not only positive comments about the phone, but also learn about its problems. This approach is applicable to different areas.
• Critically analyze information. This is a complex skill that can be learned through practice. When making important decisions based on information, try to ask yourself why you should trust it, whether its source is reliable, whether it is supported by other data, and so on. In addition to practicing critical thinking, you can also add theory by choosing a suitable book.

When analyzing any statement, it is important to consider the sources of data, the methods used to obtain it, and any existing gaps in the information. Ask yourself, "What data might be missing?" This will help you form a more complete picture and avoid drawing one-sided conclusions.

Sendhil Mallenathan is a professor of computational and behavioral science at the University of Chicago Booth School of Business. His research covers a wide range of topics, including behavioral economics and the impact of technology on decision making. Mallenathan's work has been published in prestigious academic publications such as Scientific American, where he shares his views on how technology and data can change our understanding of consumer behavior and business processes. The importance of his research lies in its practical application, which helps companies adapt to rapidly changing market conditions and make more informed decisions.

Remember Wald and the airplanes: pay attention not only to what you see, but also to what's behind the scenes. This is an important principle that helps you understand what's happening more deeply and not miss significant details. Analyze a situation from multiple angles to gain a full understanding of the context.

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Reading is an important part of our lives, enriching our inner world and broadening our horizons. It helps deepen knowledge in various fields, develops critical thinking, and improves communication skills. Whether you prefer fiction, scientific articles, or educational materials, every text has the potential to be beneficial. Reading also helps improve concentration and attention, which is especially important in today's distracting world. Start setting aside time for reading every day, and you will notice how it will positively affect your thinking and perception of the world around you.

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