Survivorship Bias
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Definition of 'Survivorship Bias'
Survivorship bias is a cognitive bias that occurs when people only consider the results of successful people or events, and ignore the results of those who failed. This can lead to a distorted view of reality, and can make it difficult to make accurate decisions.
For example, imagine you are considering investing in a new company. You look at the company's financial statements and see that it has been profitable for the past five years. This might lead you to believe that the company is a good investment. However, you don't know what happened to the companies that were not profitable. Perhaps they were all unsuccessful, or perhaps some of them were successful but went out of business. Without knowing this information, you cannot make an informed decision about whether or not to invest in the company.
Survivorship bias can also occur when people make decisions based on their own personal experiences. For example, you might have a friend who invested in a particular stock and made a lot of money. This might lead you to believe that the stock is a good investment. However, you don't know how many other people invested in the same stock and lost money. Without this information, you cannot make an informed decision about whether or not to invest in the stock.
Survivorship bias can be a serious problem, because it can lead to people making bad decisions. To avoid this bias, it is important to consider all of the available information, not just the information about successful people or events.
For example, imagine you are considering investing in a new company. You look at the company's financial statements and see that it has been profitable for the past five years. This might lead you to believe that the company is a good investment. However, you don't know what happened to the companies that were not profitable. Perhaps they were all unsuccessful, or perhaps some of them were successful but went out of business. Without knowing this information, you cannot make an informed decision about whether or not to invest in the company.
Survivorship bias can also occur when people make decisions based on their own personal experiences. For example, you might have a friend who invested in a particular stock and made a lot of money. This might lead you to believe that the stock is a good investment. However, you don't know how many other people invested in the same stock and lost money. Without this information, you cannot make an informed decision about whether or not to invest in the stock.
Survivorship bias can be a serious problem, because it can lead to people making bad decisions. To avoid this bias, it is important to consider all of the available information, not just the information about successful people or events.
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