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110. Survivorship Bias: Stop Missing What’s Missing (A Behavioral Economics Foundations Episode)

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APPSTORE
 
On today’s behavioral economics foundations episode we are going to be talking about survivorship bias. I decided on this episode when Kurt Nelson (cohost of Behavioral Grooves with Tim Houlihan–last week’s guest) shared a comic of the concept on LinkedIn. After some conversation with Benjamin Granlund (the artist from the Lantern Group who created the comic) I learned this is part of their new 100 Behaviors project. They’re sharing (you guessed it!) 100 different behaviors/BE concepts on the socials through these fun little cartoons. One of the early ones is on survivorship bias, and I have linked to their Instagram so you can follow along as well.
So, what is survivorship bias? It may sound like it is only a life or death thing…and while that is part of how it was discovered it is more than just about surviving. And, like all the biases you hear me talk about on the show, your brain is using this one all the time, and it can absolutely impact the decisions you make in your business.
Survivorship bias impacts entrepreneurs for sure, but it is also leading people astray in all sorts of businesses. Understanding this concept and being on the lookout for it can help you make better decisions on what to invest in—money and time, make your calculations and predictions of your work more accurate, and generally increase the likelihood that your endeavors are more successful.
Let’s start with the story of how this bias was discovered, which will require us to journey back to the days of WWII…

Show Notes:

  • [03:19] Survivorship bias impacts entrepreneurs for sure, but it is also leading people astray in all sorts of businesses. 
  • [03:49] Melina shares the story of how this bias was discovered, which requires us to journey back to the days of WWII. In a war, the slightest edge can be the difference between success and failure.
  • [05:52] The problem with reinforcing the spots on the planes that have received the most bullets, is that it doesn’t account for a very large and important part of the data set (the planes that didn’t make it back). This conclusion is missing what’s missing.
  • [06:46] In fact, those blank spots are where you want to reinforce the planes. It will make them stronger in those places so they can take some fire there and not go down.
  • [07:39] One common example of survivorship bias is when you seek advice on how to be successful.
  • [09:11] 2 million of the students who start college each year will drop out before graduating.
  • [10:04] If you only look at the successful people and ignore those who failed you aren’t getting the true picture.
  • [10:53] We just see the few who win and it makes it seem like those stories are more common than they really are.
  • [11:24] As we look back on our own lives, we see choices that we think got us to where we are, but those on their own are not the answer. 
  • [13:15] There are lots of other factors that determine success. If you do exactly the same thing year after year you will not always have the same end result.
  • [13:51] Survivorship bias was making them only look at what they did and assume that it is the winning formula no matter what, but it just isn’t the whole picture.
  • [15:10] Just because two things are seen at the same time doesn’t mean that one caused the other to occur. This is the difference between correlation and causation. 
  • [16:07] Just because two data sets appear to go together doesn’t mean one actually caused the other to happen.
  • [16:59] Even if there is causation it doesn’t mean that it is the only thing that is causing that particular outcome to occur. 
  • [18:12] For every 1 popular book out there, one million unsuccessful books and their authors are the other side of this survivorship bias phenomenon.
  • [18:41] There isn’t a magic pill or silver bullet to “win.” It takes trial and error and a lot of hard work. 
  • [19:28] Being ready to invest and do the hard work (which includes looking at your goals and problems from all angles and taking the tendency of survivorship bias into account) will put you miles ahead of your competitors and make it more likely that you will succeed too.
  • [19:46] Some other areas where survivorship bias can cause us problems is when we say things like, “I will win because I have a better product or service than they do.”
  • [20:30] The lesson here is to look at all the possible data points and not focus on one single aspect.
  • [20:48] Another place where survivorship bias comes into play is on customer satisfaction surveys and other questions you are asking of your current customer base.
  • [22:31] Across the board, if you aren’t considering the full data set of people, your results (and consequently the actions you take based on those results) will be biased.
  • [23:00] A good rule of thumb is to stop, take a breath and ask, “What about everyone else?” or “Who have we not thought of?” “Who else is there?”
  • [25:29] Taking the time to slow down and consider what might be missing, what the data could look like from another angle and reframing your question to see how the results and insights change, can make a huge difference.
  • [25:44] Look at the survivors, winners and success stories, but don’t forget about everyone else. Their lessons can keep you grounded and help you to become your own winning success story.

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