Survivorship bias is a logical error in which we focus on those who have succeeded or survived without considering those who have failed or died. This can lead to incorrect conclusions because it does not account for the full picture.
One common example of survivorship bias is in the investment world. Investors often look at the performance of successful funds and try to invest in them, but they ignore the funds that have failed. This can lead investors to overestimate the potential returns of their investments and underestimate the risks.
Another example of survivorship bias is in the field of medicine. Researchers may study the survivors of a disease to learn about the effectiveness of a treatment. However, if they do not also study the people who died from the disease, they may overestimate the effectiveness of the treatment and draw inaccurate conclusions.
Survivorship bias can also occur in everyday life. For example, a person who is starting a new business might be encouraged by the stories of successful entrepreneurs. However, they may not realize that for every successful business, there are many that fail. This can lead the person to underestimate the challenges of starting a business and to make unrealistic expectations.
Why survivorship bias is important
Survivorship bias is important because it can lead to us making poor decisions. For example, if we are only exposed to stories of successful entrepreneurs, we may be more likely to start a business without fully understanding the risks involved. Or, if we only invest in mutual funds that have performed well in the past, we may be overestimating our chances of success.
How to avoid survivorship bias
There are a few things that you can do to avoid survivorship bias:
- Be aware of the possibility of survivorship bias. This is the first step to avoiding it.
- Consider all of the evidence, not just the evidence that supports your existing beliefs.
- Look for data that includes both successes and failures.
- Be skeptical of claims that are based on survivorship bias.
Here are some tips for identifying survivorship bias:
- Look for data that is incomplete or biased. For example, if you are looking at data on the performance of mutual funds, make sure that the data includes all of the funds that have ever existed, not just the ones that are still in existence.
- Be wary of claims that seem too good to be true. For example, if you see an advertisement for a new investment product that claims to guarantee high returns, be skeptical.
- Ask yourself who benefits from the claim. For example, if a salesperson is telling you about a new investment product, ask yourself how much money they make if you invest in it.
Examples of survivorship bias in the real world
Here are a few examples of survivorship bias in the real world:
- Investing: Investors often look at the performance of successful funds and try to invest in them, but they ignore the funds that have failed. This can lead investors to overestimate the potential returns of their investments and underestimate the risks.
- Medicine: Researchers may study the survivors of a disease to learn about the effectiveness of a treatment. However, if they do not also study the people who died from the disease, they may overestimate the effectiveness of the treatment and draw inaccurate conclusions.
- Business: A person who is starting a new business might be encouraged by the stories of successful entrepreneurs. However, they may not realize that for every successful business, there are many that fail. This can lead the person to underestimate the challenges of starting a business and to make unrealistic expectations.
- Self-help books: Self-help books often focus on the stories of successful people and give advice on how to achieve success. However, they often ignore the stories of people who have failed, even though these stories can be just as valuable.
Conclusion
Survivorship bias is a common logical error that can lead to us making poor decisions. By being aware of the possibility of survivorship bias and taking steps to avoid it, we can make better decisions in all areas of our lives.
