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survivorship bias

also: survivor bias

Survivorship bias is a type of bias where we focus on the stories of those who were wildly successful. Those stories makes us believe that success is normal. This is true even when almost all people fail. This bias makes us feel we will surely achieve statistically unlikely success.

Whether it be movie stars, or athletes, or musicians, or CEOs of multibillion-dollar corporations who dropped out of school, popular media often tells the story of the determined individual who pursues their dreams and beats the odds. There is much less focus on the many people that may be similarly skilled and determined but fail to ever find success because of factors beyond their control or other (seemingly) random events.[9] This creates a false public perception that anyone can achieve great things if they have the ability and make the effort. The overwhelming majority of failures are not visible to the public eye, and only those who survive the selective pressures of their competitive environment are seen regularly.

Wikipedia on survivorship bias

Watch out for this bias

By focusing on the stories of those who were successful, multi-level marketing and pyramid schemes use survivorship bias to help recruit new participants. Most people listen to the stories from real people and think “those people were successful, I will be successful too.” Statistically most participants will not earn any money from multilevel marketing. This is survivorship bias at work.

To combat survivorship bias, the FTC business guidance includes that MLM companies should not make claims that are not “generally achievable.” Also, companies should provide information about what participants can generally expect. This often takes the form of income disclosure statements.

TIP: When evaluating business opportunities, ask about the outcomes for most participants rather than relying on the stories of only successful individuals. Ask for data that includes all participants.

One Comment

  1. […] Turning to the 2017 disclosure. We see that the top 1% of earners made more than $10,000. The disclosure lets us know that these consultants had an average tenure with Thirty-One Gifts of over six years. That’s a very long time. Looking only at these participant’s earnings in their most successful years is a form of survivorship bias. […]

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