Survivorship Bias: Missing What You Are Missing
Business
Famously known as the logical error of missing the ones that have been left out, survivorship bias often acts as a blockage hiding the reality. Intriguing, isn’t it? Read the story to find out.
Crux of the Matter
What Is Survivorship Bias?
The bias came into light during the World War II. Below is an image of a fighter plane that has returned from the war. The red dots in the image are the places where the planes had been shot the most.
The army considered armouring the planes more around the worst hit parts. However, mathematician Abraham Wald had a different opinion. He realised that they were not considering the planes that crashed and hence did not survive.
The red spots indicated that if shot on those areas, the plane can survive.The planes that did not return would have been shot at fatal parts. And for the planes that survived - the most crucial parts were comparatively safer! Wald thus suggested armouring the parts that had little or no damage!
So What Is Survivorship Bias?
It is this a tendency to only focus on survivors instead of everyone.
Survivorship Bias In Everyday Life
We usually listen to the stories of successful individuals and try to follow what is to be done. However, we neglect the stories of the ones who have failed to understand what is not to be done.
In Finance
Studies for analysing returns on Mutual Funds consider the performance of the funds that are currently active. They ignore funds that were closed down or were acquired by others.
Curiopedia
Originally developed for maritime use, the SOS is a Morse code distress signal ( ▄ ▄ ▄ ▄▄▄ ▄▄▄ ▄▄▄ ▄ ▄ ▄ ) that is used internationally. SOS stands for ‘Save Our Souls’.