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Survivorship Bias: Difference between revisions
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(Created page with "'''We pay attention to winners. And forget about losers. However, both sides of a story have an equal part to play in important lessons.''' alt=Survivorship Bias, humans pay attention more to winners than losers however both players have an equally valid lesson.|thumb|'''''Figure 1'''. Don't reinforce the scars of war.'' Mathematician Abraham Wald coined the term "''Survivorship Bias''" while working in a research group during Second World...") |
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== Three more survivorship bias examples: == | == Three more survivorship bias examples: == | ||
* '''Technology Trends''': People tend to focus on the winners of technological waves. Like Ford and the car industry in the early 1900s. Or Amazon and the internet in the 90s. This creates the impression that all companies that ride a big trend can be successful — like AI today. But in 1908, there were 253 car manufacturers. Only 4 of them survived. | * [[File:Survivorship Bias Diagram.png|alt=Survivorship Bias|thumb|'''Figure 2'''. Observation of survivors (as they are the only ones there!) leads to survivorship bias.]]'''Technology Trends''': People tend to focus on the winners of technological waves. Like Ford and the car industry in the early 1900s. Or Amazon and the internet in the 90s. This creates the impression that all companies that ride a big trend can be successful — like AI today. But in 1908, there were 253 car manufacturers. Only 4 of them survived. | ||
* '''Stock Market Returns''': People love looking at Warren Buffett’s historical returns. And calculate how much they’d be worth if they invested in Berkshire 50 years ago. I like it too, not gonna lie. But this makes people expect Buffett-like returns when they invest. While stock market history is full of unsuccessful investors and funds. | * '''Stock Market Returns''': People love looking at Warren Buffett’s historical returns. And calculate how much they’d be worth if they invested in Berkshire 50 years ago. I like it too, not gonna lie. But this makes people expect Buffett-like returns when they invest. While stock market history is full of unsuccessful investors and funds. | ||
* '''Lottery Effect''': People focus on lottery winners. And forget millions who bought a ticket but didn’t get anything. So they keep buying lottery tickets. Even though winning chances are lower than getting struck by a lightning. | * '''Lottery Effect''': People focus on lottery winners. And forget millions who bought a ticket but didn’t get anything. So they keep buying lottery tickets. Even though winning chances are lower than getting struck by a lightning. | ||