On Survivorship Bias In Business

Survivorship bias is a pervasive fallacy that exists in business, where people focus on the few survived players, in any given market, without realizing that most initial players in that given market are dead, or went into oblivion. In short, survivorship bias transforms the past into a linear story, by removing uncertainty from it.

Understanding survivorship bias

When I saw this on Twitter, I had to comment on it!

It is true that when you take a very long-term view (at least 10-15 years) of markets, it’s easy to argue that you’ll win.

But that misses a few key points about how the real world works:

1. When we analyze the past, the survivorship bias is extreme.

We tend to see only the very few players that made it when most initial players were either wiped out, bought at a discount, or went into oblivion.

2. Markets might rebound in the very long term. But they also might not.

In short, during the dot-com bubble, Amazon crashed by more than 90%, and yet, it took Amazon the stock made it back to new all-time highs by late 2009, all the while the company faced tough times.

The crisis eventually changed the business playbook, yet survival was not a guarantee!

3. When markets turn bad, priorities change.

When there is a lot of liquidity, investors prioritize growth at all costs.

When markets turn red, they look for profit margins and viable business models.

Therefore, having the runaway, to stand for at least a few quarters, becomes critical, and cutting the unnecessary costs becomes key.

4. Many failures during market downturns don’t mean they were terrible ideas.

In many cases, they simply had the wrong timing or execution strategy.

Take how companies like Webvan (grocery online) failed miserably, and yet how, today, this is one of the hottest industries around.

5. Over time, especially in the tech world, things tend to consolidate in the hands of a few winners.

Picking them up is like winning the lottery.

Imagine a game where you start with a thousand potential winners, but after ten years, you only have 3-5.

You might have been correct in guessing the Internet was the future, and yet you might have missed it, in terms of investing, altogether.

In short, placing bets on the future isn’t an easy game. I wish all it took were a long-term perspective.

6. A long-term perspective does help, indeed!

As markets are mostly tied to liquidity and macroeconomics in short.

On the other hand, they align (or at least the chances to align) with fundamentals in the long term.

7. As a business person, you want to focus on building valuable stuff.

So whether markets go up or down is relatively significant.

Of course, it matters because you might be navigating in stormy waters if you need funding.

And in addition, revenues and profitability might slow down independently of how good is the product.

But this is also an opportunity to reduce the noise and focus on what works.

Indeed, there is much less noise during downturns, and builders can concentrate on the product

Survivorship bias and outcome bias

There is a connection between survivorship bias and outcome bias, where events are judged based on their scorecard without understanding that the outcome might have been skewed by factors unrelated to the final outcome.

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

One example of that is how for one successful Jeff Bezos, there have been thousands or millions of Jeff Bezos-like individuals that not only didn’t achieve the level of greatness of Bezos but actually miserably failed.

Thus, when taking into account incredible outcomes, it’s also critical to balance them out by understanding the survivorship bias in action.

By selecting as your sample the people that have survived, sure, there might be some signal there, but the greater the success, the greater also the luck/random factor, which is hard to eliminate from the outcome.

Outcome bias and survivorship bias, combined, might fool us into believing in a linear world mindset, where we think that habits or thoughts will automatically transform into outcomes and successes.

While it’s fine to be fooled by those things, in the short-term, if they do lead to action (let’s say you fall into the trap of believing you can be as successful as Jeff Bezos, yet that leads you toward building a business for yourself) it’s also critical to acknowledge them in the long-term.

Indeed, let’s say you started a business by naively assuming you could revolutionize a whole industry.

As you build the business, you realize that it wasn’t as simple as you imagined, quite the opposite.

And you fail. Yet, now you have experience, which you can turn into your own understanding of the world, rather than trying to emulate success cases that might be completely off compared to where you are right now.

Cherry-picking and survivorship bias

Another tendency related to the survivorship bias is that of picking only what we think is useful to prove our point.

Once again, if cherry-picking leads toward doing things that we otherwise would not have done, then it’s a great short-term propeller.

Yet, over time, it’s critical to transform that naivety into business acumen!

Heuristic and mental models

For the sake of the above, it’s important to develop your own understanding of the world through a set of heuristics that can drive you in making decisions in an uncertain, opaque business world!

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Examples and Case Studies

  • Stock Market Success Stories: In the stock market, people often celebrate the success stories of investors who made significant gains on certain stocks. However, this overlooks the vast number of investors who lost money on other stocks or the market as a whole. Those who made successful bets on individual stocks may have experienced survivorship bias, leading them to believe they have special skills in picking winning stocks.
  • Business Case Studies: When studying successful businesses, such as Apple or Google, it’s crucial to acknowledge survivorship bias. For every Apple or Google, there are many other startups and companies that failed to achieve the same level of success. It’s essential to consider the factors that contributed to their success and also examine the factors that led to the failure of other companies.
  • Entrepreneurial Narratives: Entrepreneurial success stories are often glorified in media and popular culture. People may be inspired by stories of entrepreneurs who started from nothing and achieved massive success. However, these stories may not represent the reality for the majority of entrepreneurs, as many startups fail within the first few years of operation.
  • Investment Strategies: Some investment strategies, such as value investing, rely on finding undervalued stocks and betting on their long-term success. However, investors should be aware of survivorship bias in evaluating past performance. The successful stocks that fit the strategy are highlighted, while the unsuccessful ones are ignored.
  • Historical Analysis: When analyzing historical events or trends, survivorship bias can influence our understanding. For example, when studying the success of certain military strategies in wars, we may only focus on the victories and overlook the strategies that failed or led to defeat.
  • Personal Decision-Making: In personal decision-making, survivorship bias can lead people to make decisions based on the success stories they have heard or seen. For example, someone may start a business or invest in a particular market because they heard about others who succeeded in the same field, without fully understanding the risks and challenges involved.

Case Studies

  • Survivorship Bias in Music: Celebrating legendary bands and musicians from the past while forgetting about the countless bands that never gained recognition or disbanded due to lack of success.
  • Survivorship Bias in Aviation: Focusing on famous pilots like Amelia Earhart or Charles Lindbergh who successfully completed historic flights, while ignoring the pilots who disappeared or crashed during similar endeavors.
  • Survivorship Bias in Celebrity Marriages: Highlighting long-lasting celebrity marriages as relationship goals, while disregarding the high divorce rates among celebrities.
  • Survivorship Bias in Innovation: Studying successful inventions and innovations like the light bulb or the iPhone and overlooking the numerous failed prototypes and ideas that never made it to market.
  • Survivorship Bias in Literature: Celebrating classic literature and renowned authors while forgetting the vast number of writers who struggled to get published or remained obscure.
  • Survivorship Bias in Social Movements: Focusing on the leaders and figures of successful social movements (e.g., Martin Luther King Jr. in the civil rights movement) while neglecting the contributions of countless activists who worked behind the scenes.
  • Survivorship Bias in Weight Loss: Promoting weight loss success stories and transformation journeys on social media while not considering the many individuals who struggle with weight loss and face setbacks.
  • Survivorship Bias in Education: Highlighting the achievements of Ivy League graduates and successful entrepreneurs who dropped out of college while overlooking those who attended prestigious universities but didn’t achieve extraordinary success.
  • Survivorship Bias in the Film Industry: Celebrating Oscar-winning actors and directors while forgetting the multitude of aspiring actors and filmmakers who never gained recognition.
  • Survivorship Bias in Startups: Showcasing unicorns (startups valued at over $1 billion) and their founders while not acknowledging the high failure rate and challenges faced by most startups.
  • Survivorship Bias in Health and Fitness: Promoting fitness programs endorsed by athletes with exceptional physiques while neglecting individual variations and the hard work of many who don’t achieve similar results.
  • Survivorship Bias in Personal Finance: Following investment strategies of individuals who became millionaires through unconventional means (e.g., cryptocurrency) without considering the risks and losses faced by others.
  • Survivorship Bias in Scientific Discoveries: Celebrating groundbreaking scientific discoveries and Nobel laureates while disregarding the countless experiments and research endeavors that didn’t yield significant results.
  • Survivorship Bias in Real Estate: Showcasing real estate investors who amassed substantial wealth through property investments while ignoring those who faced foreclosure or financial setbacks.
  • Survivorship Bias in Fitness Equipment: Promoting exercise equipment endorsed by athletes while not considering the unused gym memberships and home fitness equipment that gather dust.

More examples:

  • Investment Success Stories: Celebrating individuals who made significant profits in the stock market, like Warren Buffett or Elon Musk, while ignoring the countless investors who incurred losses.
  • Entrepreneurial Success Narratives: Glorifying stories of successful entrepreneurs, such as Steve Jobs or Jeff Bezos, without acknowledging the many startups that failed or struggled.
  • Historical Military Strategies: Focusing on victorious military strategies in history and overlooking failed tactics or battles that resulted in defeat.
  • Surviving Pandemics: Highlighting individuals who survived pandemics or serious illnesses and attributing their survival solely to personal factors, disregarding those who succumbed.
  • Survivorship Bias in Music and Arts: Celebrating famous artists and musicians while forgetting the countless talented individuals who never achieved recognition during their lifetimes.
  • Sports Legends: Celebrating sports legends who achieved fame and fortune while ignoring the countless athletes who didn’t make it to the professional level or had short-lived careers.
  • Business Case Studies: Analyzing successful companies like Apple, Google, or Amazon and attributing their success to specific strategies without considering the many failed businesses that employed similar approaches.
  • Academic Achievements: Focusing on individuals who excelled academically and attributing their success to intelligence or hard work, while disregarding those who faced challenges or had different learning styles.
  • Survivorship Bias in Social Media: Showcasing people who achieved popularity or success on social media platforms, like Instagram influencers, without acknowledging the vast majority who struggle to gain followers and engagement.
  • Survival of Species: Discussing the survival of certain endangered species while overlooking those that went extinct due to habitat loss or other factors.
  • Career Advice and Role Models: Promoting successful professionals as role models and suggesting that following their career paths guarantees success, without considering individual circumstances and luck.
  • Financial Gurus: Following financial advice from self-proclaimed gurus who claim to have made a fortune in a specific way, without considering that their success might be an outcome of survivorship bias.
  • Surviving Natural Disasters: Focusing on people who survived natural disasters and attributing their survival to preparation or resilience, while not considering those who faced unfortunate outcomes.
  • Survivorship Bias in Artifacts: Studying ancient artifacts and structures that have survived over centuries, often overlooking those that deteriorated or were destroyed.
  • Athletic Training Programs: Promoting training programs based on the routines of successful athletes, without considering individual differences, genetics, and the many who didn’t achieve similar results.

Key takeaways

  • There is a spread survivorship bias when looking at business history, which focuses on the very few survived companies. Looking back, it was apparent they were supposed to thrive. Yet, placing a bet on those companies back in the day was as tricky as an understanding today which companies are worth betting on! Things look linear and straightforward only in hindsight. 
  • The survivorship bias is very pervasive, and it starts from the assumption that if you were to hold your position for long enough, you would get rewarded. Yet while this might be true in some cases, many other companies cease to exist altogether when a crisis strike. 
  • Downturns are great opportunities to revise a business playbook, shift focus on product, and build valuable stuff. Noise reduction in downturns is incredible, and this becomes the best time to make valuable stuff!

Read Next: Business Model.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.


The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.


Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).

Systems Thinking

Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Maslow’s Hammer

Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Streisand Effect

The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.


As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

First-Principles Thinking

First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.


Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.


A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

Main Guides:

About The Author

Scroll to Top