The Hidden Dangers of Survivorship Bias in Decision Making
What is Survivorship Bias?
Survivorship bias is a logical error that occurs when we focus on successful examples while ignoring those that did not make it. This can lead us to form misleading conclusions based on incomplete data.
How Does It Work?
Survivorship bias often happens in various fields, including finance, psychology, and even history. When we only look at those who survived or succeeded, we miss out on important lessons from those who didn’t.
Example of Survivorship Bias
One classic example is the case of World War II bombers. When analyzing which planes to reinforce, military strategists looked at the planes that returned. They noticed bullet holes in certain areas and decided to reinforce those spots. However, they were ignoring the planes that didn’t return, which might have been hit in different areas. This oversight could have led to more losses had they not considered the full picture.
Types of Survivorship Bias
- Positive Survivorship Bias: This is when we only recognize successful outcomes. For instance, people often discuss successful entrepreneurs without considering the many who fail.
- Negative Survivorship Bias: This occurs when we only focus on failures. For example, in health studies, we might hear about patients who didn’t survive a treatment without acknowledging those who thrived.
Real-Life Implications
Survivorship bias can have serious consequences in various areas:
- Investing: When looking at the performance of mutual funds, people often consider only the funds that survive. This gives a skewed perception of overall performance.
- Career Choices: Individuals may be inspired by successful figures in their fields but overlook the countless others who struggled.
- Health Decisions: When considering treatments, people might hear stories of bright recoveries from a certain medication while ignoring the experiences of those for whom it didn’t work.
Steps to Avoid Survivorship Bias
- Seek Comprehensive Data: Always look for full datasets, including failures, to get a clearer picture.
- Ask Questions: When evaluating success stories, inquire about the unseen challenges and failures.
- Consider Context: Understand the environment and circumstances surrounding both successes and failures.
Comparison With Other Cognitive Biases
Survivorship bias is often compared to other cognitive biases:
- Confirmation Bias: This is when we favor information that confirms our existing beliefs. Survivorship bias skews our understanding by neglecting the failures.
- Hindsight Bias: This occurs when we believe an event was predictable after it has happened. Survivorship bias often results in hindsight bias, making us think success was more likely than it actually was.
Categories of Survivorship Bias
Survivorship bias can be categorized based on its context:
- Financial: In investments, focusing on successful funds can lead to poor investment decisions.
- Health: In studies, focusing on survivors can skew the effectiveness of treatments.
- Social: When discussing success stories in various fields, one may overlook the hard work and failures of many.
By recognizing survivorship bias, we can improve our decisionmaking and better understand the complexities of success and failure.