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What is behavioral economics? Why does it matter to you?

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Podcast Episodes

What is behavioral economics? Why does it matter to you?

400. Unveiling Survivorship Bias: How It Shapes Business Decisions (Refreshed Episode)

Welcome to the 400th episode of The Brainy Business podcast! In this milestone episode, Melina Palmer delves into the intriguing concept of survivorship bias, a critical thinking error that can significantly impact decision-making in business and personal life. Through engaging storytelling, Melina takes us back to World War II to uncover the origins of this concept and how it played a crucial role in military strategy. 

She then brings the concept into contemporary contexts, illustrating how survivorship bias leads us to overvalue success stories while ignoring the vital lessons from failures. This episode not only celebrates our podcast’s journey but also equips you with practical insights to recognize and overcome survivorship bias in your ventures. Join Melina as she explores this bias’s profound implications on entrepreneurship, business strategies, and everyday decisions, helping you make more informed choices. 

In this episode:

  • Understand how survivorship bias impacts business success and decision-making.
  • Explore the powerful influence of behavioral economics on shaping strategic choices in business.
  • Discover effective strategies to overcome survivorship bias and drive more informed decision-making.
  • Differentiate between correlation and causation in business strategies to make more impactful choices.
  • Uncover the success factors that extend beyond survivorship bias and drive sustained business growth.
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IN A RUSH?

HERE'S A 2 MINUTE TIP.

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SHOW NOTES:

00:00:00 – Introduction
Melina introduces the concept of survivorship bias and its relevance to business decisions. She emphasizes the impact of this bias on entrepreneurs and its influence on decision-making in various roles across industries.

00:04:08 – Abraham Wald and World War Two
Melina delves into the story of Abraham Wald, a mathematician who discovered survivorship bias during World War Two. She highlights the significance of Wald’s analysis of bullet holes on planes and the crucial insights it provided on reinforcing strategic spots.

00:09:16 – The Fallacy of Survivorship Bias
The discussion focuses on the fallacy of survivorship bias in seeking advice for success. Melina provides examples of how survivorship bias leads to misconceptions about causation and correlation, using narratives of successful individuals as illustrations.

00:11:31 – Business Applications of Survivorship Bias
Melina explores the business applications of survivorship bias and its implications for decision-making. She emphasizes the complexity of success and the dangers of assuming a one-size-fits-all approach based on survivorship bias.

00:13:56 – Correlation vs. Causation
The conversation delves into the distinction between correlation and causation, highlighting the misconceptions that arise from survivorship bias. Melina illustrates the importance of discerning causation for making informed decisions in business and life.

00:15:46 – Survivorship Bias in Conclusions
Not all successful CEOs wake up at 05:00 a.m. Correlation doesn’t imply causation. It’s important to consider all data points and not draw conclusions based on one aspect.

00:16:21 – Success and Failure in Publishing
For every popular book, there are a million unsuccessful books and authors. It takes trial and error and hard work to succeed. Learn from others’ experiences and determine what works for your goals.

00:18:07 – The Illusion of the Best Product
The best products don’t always lead the market. Being the best or first doesn’t guarantee success. Look at all possible data points and consider what’s missing for your business venture.

00:19:55 – Customer Feedback and Satisfaction
Customer satisfaction surveys may not capture all feedback. Consider the concerns of those who didn’t choose your business. Look beyond extreme examples and aim for a complete data set for feedback.

00:23:49 – Openness to Unexpected Findings
Be open to the things you aren’t looking for. Anomalies and unconventional ideas could lead to valuable insights. Consider reframing questions and exploring untested areas to avoid survivorship bias.
00:24:48 – Conclusion
What stuck with you while listening to the episode? What are you going to try? Come share it with Melina on social media — you’ll find her as @thebrainybiz everywhere and as Melina Palmer on LinkedIn.

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