400. Unveiling Survivorship Bias: How It Shapes Business Decisions (Refreshed Episode)

The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

Welcome to the 400th episode of The Brainy Business podcast! In this milestone episode, Melina Palmer delves into the intriguing concept of survivorship bias, a critical thinking error that can significantly impact decision-making in business and personal life. Through engaging storytelling, Melina takes us back to World War II to uncover the origins of this concept and how it played a crucial role in military strategy.

She then brings the concept into contemporary contexts, illustrating how survivorship bias leads us to overvalue success stories while ignoring the vital lessons from failures. This episode not only celebrates our podcast’s journey but also equips you with practical insights to recognize and overcome survivorship bias in your ventures. Join Melina as she explores this bias’s profound implications on entrepreneurship, business strategies, and everyday decisions, helping you make more informed choices.

In this episode:

• Understand how survivorship bias impacts business success and decision-making.
• Explore the powerful influence of behavioral economics on shaping strategic choices in business.
• Discover effective strategies to overcome survivorship bias and drive more informed decision-making.
• Differentiate between correlation and causation in business strategies to make more impactful choices.
• Uncover the success factors that extend beyond survivorship bias and drive sustained business growth.

Show Notes:

00:00:00 - Introduction Melina introduces the concept of survivorship bias and its relevance to business decisions. She emphasizes the impact of this bias on entrepreneurs and its influence on decision-making in various roles across industries. 00:04:08 - Abraham Wald and World War Two Melina delves into the story of Abraham Wald, a mathematician who discovered survivorship bias during World War Two. She highlights the significance of Wald's analysis of bullet holes on planes and the crucial insights it provided on reinforcing strategic spots. 00:09:16 - The Fallacy of Survivorship Bias The discussion focuses on the fallacy of survivorship bias in seeking advice for success. Melina provides examples of how survivorship bias leads to misconceptions about causation and correlation, using narratives of successful individuals as illustrations. 00:11:31 - Business Applications of Survivorship Bias Melina explores the business applications of survivorship bias and its implications for decision-making. She emphasizes the complexity of success and the dangers of assuming a one-size-fits-all approach based on survivorship bias. 00:13:56 - Correlation vs. Causation The conversation delves into the distinction between correlation and causation, highlighting the misconceptions that arise from survivorship bias. Melina illustrates the importance of discerning causation for making informed decisions in business and life. 00:15:46 - Survivorship Bias in Conclusions Not all successful CEOs wake up at 05:00 a.m. Correlation doesn't imply causation. It's important to consider all data points and not draw conclusions based on one aspect. 00:16:21 - Success and Failure in Publishing For every popular book, there are a million unsuccessful books and authors. It takes trial and error and hard work to succeed. Learn from others' experiences and determine what works for your goals. 00:18:07 - The Illusion of the Best Product The best products don't always lead the market. Being the best or first doesn't guarantee success. Look at all possible data points and consider what's missing for your business venture. 00:19:55 - Customer Feedback and Satisfaction Customer satisfaction surveys may not capture all feedback. Consider the concerns of those who didn't choose your business. Look beyond extreme examples and aim for a complete data set for feedback. 00:23:49 - Openness to Unexpected Findings Be open to the things you aren't looking for. Anomalies and unconventional ideas could lead to valuable insights. Consider reframing questions and exploring untested areas to avoid survivorship bias.

00:24:48 - Conclusion What stuck with you while listening to the episode? What are you going to try? Come share it with Melina on social media -- you'll find her as @thebrainybiz everywhere and as Melina Palmer on LinkedIn.

Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show.

I hope you love everything recommended via The Brainy Business! Everything was independently reviewed and selected by me, Melina Palmer. So you know, as an Amazon Associate I earn from qualifying purchases. That means if you decide to shop from the links on this page (via Amazon or others), The Brainy Business may collect a share of sales or other compensation.

Let’s connect:

• [e-mail]
• The Brainy Business® on Facebook
• The Brainy Business on Twitter
• The Brainy Business on Instagram
• The Brainy Business on LinkedIn
• Melina on LinkedIn
• The Brainy Business on Youtube

Learn and Support The Brainy Business:

Check out and get your copies of Melina’s Books.

Get the Books Mentioned on (or related to) this Episode:

• How to Change, by Katy Milkman
• What Your Employees Need and Can't Tell You, by Melina Palmer
• Alchemy, by Rory Sutherland
• The Invisible Gorilla, by Christopher Chabris and Daniel Simons
• Nobody's Fool, by Christopher Chabris and Daniel Simons

Top Recommended Next Episode: David McRaney Interview (ep 336)

Already Heard That One? Try These:

• Hindsight Bias (ep 167)
• What Your Employees Need and Can't Tell You (ep 225)
• Jonah Berger Interview (ep 301)
• Warren Berger Interview (ep 340)
• Cass Sunstein Interview (ep 371)

Other Important Links:

• Brainy Bites - Melina’s LinkedIn Newsletter
• What Every Founder Needs to Know About Survivorship Bias
• Why It’s So Hard To Succeed – The Survivorship Bias
• You are missing something! – Survivorship bias
• 7 Lessons on Survivorship Bias that Will Help You Make Better Decisions
• How the Survivor Bias Distorts Reality
• Survivorship Bias: The Tale of Forgotten Failures
• Missing what’s missing: How survivorship bias skews our perception
• The College Dropout Problem
• Hilarious Graphs Prove That Correlation Isn’t Causation
• The 10 Most Bizarre Correlations