You must remind yourself that when you start to pick apart winners and losers, successes and failures, the living and dead, that by paying attention to one side of that equation you are always neglecting the other.
If you are thinking about opening a restaurant because there are so many successful restaurants in your hometown, you are ignoring the fact the only successful restaurants survive to become examples. Maybe on average 90 percent of restaurants in your city fail in the first year. You can’t see all those failures because when they fail they also disappear from view. As Nassim Taleb writes in his book The Black Swan, “The cemetery of failed restaurants is very silent.”
Of course the few that don’t fail in that deadly of an environment are wildly successful because only the very best and the very lucky can survive. All you are left with are super successes, and looking at them day after day you might think it’s a great business to get into when you are actually seeing evidence that you should avoid it.
Survivorship bias pulls you toward bestselling diet gurus, celebrity CEOs, and superstar athletes. You look to the successful for clues about the hidden, about how to better live your life, about how you too can survive similar forces against which you too struggle. Colleges and conferences prefer speakers who shine as examples of making it through adversity, of struggling against the odds and winning.
The problem here is that you rarely take away from these inspirational figures advice on what not to do, on what you should avoid, and that’s because they don’t know. Information like that is lost along with the people who don’t make it out of bad situations or who don’t make it on the cover of business magazines – people who don’t get invited to speak at graduations and commencements and inaugurations.
The actors who traveled from Louisiana to Los Angeles only to return to Louisiana after a few years don’t get to sit next to James Lipton and watch clips of their Oscar-winning performances as students eagerly gobble up their crumbs of wisdom. In short, the advice business is a monopoly run by survivors. As the psychologist Daniel Kahneman writes in his book Thinking Fast and Slow, “A stupid decision that works out well becomes a brilliant decision in hindsight.”
Before you emulate the history of a famous company, Kahneman says, you should imagine going back in time when that company was just getting by and ask yourself if the outcome of its decisions were in any way predictable. If not, you are probably seeing patterns in hindsight where there was only chaos in the moment. He sums it up like so, “If you group successes together and look for what makes them similar, the only real answer will be luck.”
Entrepreneur Jason Cohen, in writing about survivorship bias, points out that since we can’t go back in time and start 20 identical Starbucks across the planet, we can never know if that business model is the source of the chain’s immense popularity or if something completely random and out of the control of the decision makers led to a Starbucks on just about every street corner in North America. That means you should be skeptical of any book promising you the secrets of winning at the game of life through following any particular example.
David McRaney Read more here