Survivorship Bias: The Hidden Side of Success

1 minutes reading time
Published 16 Nov 2023
Reviewed by: Kasper Karlsson

In a world where success stories often dominate headlines, it's crucial to understand the concept of 'Survivorship Bias'. This cognitive bias can lead us to draw incomplete or incorrect conclusions, simply because we focus only on the winners or survivors, ignoring those who didn't make it. But what is survivorship bias, and how does it influence our perception of success and failure?

The Origin of the Term

The term 'survivorship bias' gained prominence during World War II. The concept of survivorship bias plane refers to a pivotal study by Abraham Wald. When military analysts sought to reinforce American planes to reduce casualties, they initially considered reinforcing areas with the most bullet holes on returning planes. However, Wald pointed out that the data was skewed; they were only examining planes that survived. The undamaged areas on these planes were actually the most vulnerable, as planes hit there didn't return. This revelation shifted the focus of reinforcement and saved countless lives.

Examples in Everyday Life

Survivorship bias examples are abundant in our daily lives. Consider the business world: we often hear success stories of companies like Meta or Amazon, but rarely about the numerous companies and startups that fail. This skews our understanding of entrepreneurial success, making it seem more common than it actually is.

Survivorship Bias in Investing

In the investing domain, survivorship bias is a particularly insidious issue. It occurs when failed companies are removed from performance tracking indexes, leading to inflated reports of market performance. This bias can significantly distort an investor's understanding of financial markets.

For instance, when analyzing mutual funds, reports often focus on those that have survived and thrived over a period. However, many funds may have performed poorly and been dissolved or merged. By ignoring these, the overall fund performance appears more favorable than it is in reality. This can lead investors to overestimate the likelihood of success and underestimate the risks involved.

Moreover, in the stock market, survivorship bias can lead to an overestimation of historical returns. The stocks that have done well over the years remain in the indices, while those that have failed are removed. This can give a skewed view of the market's past performance and mislead investors about future prospects.

Understanding survivorship bias helps investors approach market data with a critical eye, recognizing that reported performances often don't tell the whole story. It's a reminder of the importance of comprehensive research and considering both successes and failures in any investment analysis.


Survivorship bias is a critical concept that reminds us to look beyond the surface of success stories. By acknowledging the stories of those who didn't make it, we gain a more comprehensive understanding of reality and can make more informed decisions. Next time you hear a tale of success, remember to ask: what about those who didn't survive?

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