Fooled by Winners
Earlier, I wrote an article about survivorship bias. We love to study success stories and we try to emulate these people, but we fail to consider the stories and experiences of those who tried and failed. We assume that success can be replicated by identifying the strategies of each success story and repeating them. But by ignoring the ones who failed, and in particular, the ones who carried out the same strategies and failed, we miss out on an important data set.
Here we look at the second part of survivorship bias. We, as observers, forget that we ourselves are survivors. In ‘Fooled by the Winners’, David Lockwood writes about a sailor who mistakenly reasons he will always safely return to port because he has always done so in the past. But he has neglected one data set. The instances in which his ship is lost at sea; because in those cases he has died. Therefore there is a tendency for survivors to overstate their successes, simply because they fail to see the other possibilities.
Today, humans are at the top of the food chain. We control the world. Animals are kept in nature reserves or in zoos, for our entertainment, and for their protection. Yet just millions of years ago, dinosaurs ruled the world. Given that they were better hunters than us and for the most part, larger than us, it would be difficult to imagine how we could co-exist with them. In fact, back in those times, we’d assume dinosaurs would rule the world. But for a rock that collided with earth, we became the dominant species on the planet. The dinos didn’t know what hit them and somehow we escaped all of that. We survived, for now.
Survivorship bias is ignoring the possibility that we could have been wiped out. Had history taken a different path, outcomes might have been different. Lockwood researches different scenarios where our world came close to the brink of destruction, due to different geopolitical tensions. In each case, it was luck that led us out of it. We survived, for now.
Survivorship bias kicks in because we tend to overstate success and ignore luck. Warren Buffet talked about the ovarian lottery, where he attributes his success to being born the right color, right gender, right country, and right time period. If he was born in another time period, he might not have achieved the same success (or he might have exceeded his achievements) and we wouldn’t know. In this world, the only outcome we can understand is the outcome we see.
In Buffet’s 2018 letter to shareholders, he attributes the success of Berkshire to the American Tailwind. He recognises that America’s economic growth has been exceptional, and that allowed him to journey along this exceptional growth to achieve great financial success. Success occurs when we are in the right place, at the right time.
What does that mean? Just because we’ve survived, it doesn’t mean we are definitely doing it right. It just means that our current path was one of the few where we did not perish; we observe this path of success because it is the only one we can observe. All other paths are not available for us to test. In other words, we might have succeeded not because of our efforts, but due to some unknown variable.
Perhaps though, to trick ourselves into having faith in our choices, we could take a leaf out of Robert Frost’s poem. By telling ourselves that the path we chose was the one less traveled, it made all the difference. We think we chose survival, but perhaps survival chose us. Yet, if it is easier, then let's be fooled by winners, and strive for greater success.
We’ve overcome Covid, War, and inflation in 2022. The fact that we are here is that somehow we survived. Part of it is due to effort, but part of it boils down to being in the right place at the right time. We can say we had God’s protection on us, or a higher power guiding us, or just plain luck. But certainly, it is not entirely the result of our effort that keeps us safe.
In 2023, I wish you all success, and may we all continue to strive to be better while thanking God (by whatever name we call him), that we have survived. Be proud of your successes every year, but be humble to remember that it was not entirely effort that brought you here.