Cognitive Biases and Their Impact - 14 (Survivorship Bias)

Survivorship Bias

Explanation:

Survivorship bias is a cognitive error where we emphasise the triumphs or individuals who have succeeded while neglecting or underestimating those who faced failure or didn't reach their goals. Survivorship bias arises when we only consider the 'survivors' or successes in a given scenario, leading to a lopsided and often overly optimistic view of reality. This bias can distort our understanding of success, risk, and the factors contributing to outcomes in various fields.

Abraham Wald and World War II Aircraft:

Abraham Wald's contribution during World War II serves as a foundational example of recognising and addressing survivorship bias. The military observed bullet holes in the aircraft returning from missions and initially proposed reinforcing those areas. However, Wald noted that these were the areas where aircraft could sustain damage and still return safely. The critical insight was that the undamaged areas on these returning planes were actually the most vulnerable, as hits to these areas likely meant the aircraft did not survive. By addressing survivorship bias, Wald's analysis led to more effective aircraft armour placement, potentially saving countless lives and aircraft.

Example:

Consider a school that exclusively showcases the accomplishments of its graduates who have excelled in their careers. This tendency might involve celebrating high-achieving professionals while overlooking the struggles or unfulfilled potential of others who didn't attain the same level of success.

Famous Personalities' Success Narratives:

The stories of successful individuals like Steve Jobs, Bill Gates, or Mark Zuckerberg, who achieved phenomenal success despite non-traditional educational paths, often dominate public perception. However, this narrative suffers from survivorship bias. It disregards the vast majority who may have taken similar unconventional paths but did not achieve similar success. Such narratives can create misleading assumptions about the relationship between formal education and success, potentially influencing young people to undervalue formal education or overestimate the likelihood of success without it.

In psychological research, survivorship bias can lead to erroneous conclusions if studies only consider individuals who have 'survived' or succeeded in a particular context. For instance, studying only successful professionals in a field might lead to the misconception that certain traits or behaviours are universally conducive to success while ignoring those with similar characteristics but did not succeed.

Start-up Ecosystem Illusion:

The business world, particularly the start-up ecosystem, is rife with stories of companies that started in garages and became tech giants. While these stories are inspiring, focusing solely on them overlooks the many start-ups that fail. The reality is that a significant percentage of start-ups do not survive past the first few years. This survivorship bias can create unrealistic expectations for budding entrepreneurs and investors, leading to risky decisions without fully appreciating the potential for failure.

In the realm of investments, particularly mutual funds or stocks, survivorship bias can occur when analysing the performance of funds currently available on the market. This analysis often excludes funds that have been liquidated or merged, which typically had poor performance. As a result, the overall market's performance may appear more favourable than it actually is, misleading investors.

Impact:

By concentrating solely on success stories and ignoring those who encountered setbacks or didn't meet expectations, schools miss valuable opportunities for improvement. Understanding the full spectrum of outcomes, including failures, can provide insights for refining educational strategies and support systems. This bias can hinder an institution's ability to adapt and evolve effectively.

Survivorship bias can distort our perception of reality and lead to misguided decisions if we fail to account for the experiences and lessons of those who did not succeed.

Understanding survivorship bias is crucial in both psychological and business contexts. It underscores the importance of considering the full spectrum of outcomes, not just the successful ones, to gain a more accurate and realistic understanding of the factors that contribute to success or failure. In educational and professional settings, this awareness can guide more informed decision-making, encourage a balanced perspective, and foster a more critical evaluation of success stories and business strategies.