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Survivorship Bias: Difference between revisions
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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.]] | 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.]] | ||
== | == Four 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. | * '''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. | ||
* '''Cicero's Painting''': 2,000 years ago, the Roman philosopher and politician, Cicero, told the story of an atheist named Diagoras, who had been vocal in his non-belief about the gods. Those trying to convince Diagoras of the existence of higher powers showed him a series of painted tablets that portrayed a group of sailors who had prayed during a vicious storm and then survived the shipwreck. Diagoras looked at the paintings and replied, "I see those who were saved, but where are those painted who prayed and drowned?" | |||
== Two tips to avoid survivorship bias: == | == Two tips to avoid survivorship bias: == | ||