Nov 26, 2017

Survivorship Bias is a Poor Excuse for not Trying

Microsoft’s meteoric rise can be traced back to a meeting where Bill Gates sold a vapourware operating system to IBM. If that hadn’t happened, Microsoft could’ve likely been a small company selling programming languages. Bill Gates admits that he was lucky and insists that dropping out of college education isn’t a smart idea. In another universe, Bill Gates could’ve been a CEO of a medium-size company—talented, smart but not a hugely successful one.

We have a convenient term to capture the essence of ultra-successful businesses: “Survivorship Bias”. A logical error made in seeing positive outcomes while overlooking failures. When we dwell on how a business succeeded, or how a novel became a bestseller, we forget that it might be one of the few that made it big. Most people who don’t realize it, overestimate their odds at success. Why else would so many people attempt startups when almost all fail before getting any traction?

Survivorship bias is real. Most startups fail. Most restaurants close down within the first year. However, I have started noticing the casual use of it to explain any kind of success and as an excuse to not try. “Why should one when the luck is the critical factor behind success stories?”, the sentiment runs. A XKCD comic tells it, too:


But Randall Munroe, author of XKCD, could himself be called a textbook example of survivorship bias, since only a few comic artist amass the following that he has. Is creating comic strips fruitless endeavour, then?

Not really because the “survivorship bias” excuse belies the true nature of success, which is more than dumb luck; in fact, much, much more.  

Microsoft may have found a golden opportunity in dealing with parochial IBM executives, but what made it the biggest player in software industry was its aggressive vision and the effort that followed to pursue it. Even if it had botched the opportunity, it could’ve found something else to be successful with. Time was ripe. PCs were reaching the masses. Software was becoming more and more important as hardware was getting commoditized.  

Facebook could’ve been a spectacular failure but even during its earliest days, Mark Zuckerberg showed an astute insight into what needs to be done to run a company. He was outspoken, prescient, and did everything to make sure that the best people were working for him. Decisions were data-driven and there was an unprecedented emphasis on doing what users needed—at least for a social-media company.

Survivorship Bias, while scientifically correct, overstates the role of luck in any ambitious undertaking. Luck helps but the important ingredients are resilience and learning from the mistakes. Building a successful business might not be an obvious science but it’s not rolling dices either.  This becomes more obvious when you see app-based-businesses, like Fling, that went bust. After initial luck, they quickly ran out of ideas to retain users.

Even when golden opportunities are struck, consistent effort is needed to make the best use of them. Some would say Slack came at a time where the number of apps involved in running a business were growing and keeping up with email was becoming cumbersome. Even if true, Slack did everything to make sure that they were the best communication app for teams. And is still doing it.

I would even say that the act of recognizing luck and building upon it is itself not trivial. How many people might have imagined an app to sync your files across devices? A lot, perhaps. But only Drew Houston understood what was missing in all the existing solutions.

Trying Ambitious Things is Good

When you’re trying anything ambitious, odds might be staggeringly unfavorable but there are merits in believing that it’s possible to figure things out. Even if you fail, you’ll be better prepared for the next chance. It’s not a co-incidence that many people have succeeded in trying to build a product after a few failures. Failure rates shouldn’t be a deterrent to try something.

But what about people ending under a pile of debt after failing? Isn’t that an adverse consequence of ‘trying’? True. It’s not a desirable outcome. The conclusion, however, that odds were stacked against you from the get-go and it was foolish to even try is not sound. In a 28-page letter to Disney’s executives, Jeffrey Katzenberg wrote —

Any film can fail at the box office. And that’s o.k. It’s part of our business. No one can know for certain what the public will want to see. So the basic problem with the above movies wasn’t that they were ill-conceived or misguided or even bad entertainments. The problem was that they were just too expensive.

While trying something new, especially something very original, there’s always a great possibility of failure. What needs to be made sure is that failures aren’t expensive—cost-wise or time-wise. Months spent on a project that’s not getting any serious uptake is likely going to result in aa disaster. Resilience should be shown in trying new ideas when existing ones aren’t showing results.

I am reminded of the Nature vs. Nurture debate which still remains a contentious one. But, irrespective of the research, one would do himself a favor by assuming a growth-mindset—constantly hunting things to learn. Similarly, there are no obvious ways to succeed at something but you can do worse than assuming resilience and hard-work dwarf everything else. And, at some point in the future, you’ll realize that it was a well-founded assumption.

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