2,869
edits
Survivorship Bias: Difference between revisions
m
no edit summary
mNo edit summary |
mNo edit summary |
||
| Line 1: | Line 1: | ||
'''We pay attention to winners. And forget about losers. However, both sides of a story have an equal part to play in important lessons.''' | '''We pay attention to winners. And forget about losers. However, both sides of a story have an equal part to play in important lessons.''' | ||
[[File:Survivorship Bias.png|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.'']] | [[File:Survivorship Bias.png|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 War. His group was working with the US army to reduce plane casualties, his team mapped out the most hit areas of the planes that survived the battles, so the US army could strengthen those parts. But Wald realized something was wrong the planes that returned from the battle were survivors. That meant their analysis showed ''the'' ''least important'' parts of planes. But no planes returned with a damaged cockpit or engine. So the US army reinforced the unscathed parts and casualties dropped. | Mathematician Abraham Wald coined the term "''Survivorship Bias''" while working in a research group during Second World War. His group was working with the US army to reduce plane casualties, his team mapped out the most hit areas of the planes that survived the battles (see '''Figure 1'''), so the US army could strengthen those parts. But Wald realized something was wrong the planes that returned from the battle were '''<u>survivors</u>'''. That meant their analysis showed ''the'' ''least important'' parts of planes. But no planes returned with a damaged cockpit or engine. So the US army reinforced the unscathed parts and casualties dropped. | ||
Survivorship Bias is a logical error where we focus on the people or things that "''survived''" some process and inadvertently overlook those that did not because of their lack of visibility. This can lead to false conclusions (see '''Figure 2''') in several different areas, including the misinterpretation of success in business or the effectiveness of healthcare treatments, as the failures are ignored or forgotten.[[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.]] | |||
== 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. | ||
* '''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. | ||