Business advice plagued by survivor bias (2009)

https://longform.asmartbear.com/survivor-bias/

by Garbage • 2 years ago

122 84 2 years ago

longform.asmartbear.com

Clubber• 2 years ago

I've built quite a few apps and web pages that ultimately failed primarily due to not having a client. To take a lesson from my failures, always make sure you have a client.

pizzafeelsright• 2 years ago

A successful business is where you get enough money out to make the investment worthwhile.

Given X clients paying Y with the total expenses by Z as long as X * Y > Z the business can remain solvent.

Profitability, return on investment, scale, and whatever other metric you add changes this formula.

Rainymood• 2 years ago

A shower thought I had recently is that we should start referring to "Business cases" as "Survival cases" and "Business books" as "Survival books" and that makes the inherent bias so much clearer.

lencastre• 2 years ago

Well,… my fave post grad course was Bankruptcy. It was insolvency after insolvency after insolvency and in a way also survivorship bias, but I digress — like Poor Charlie (RIP) used to say: find out where you are going to die and make sure never to go there.

hef19898• 2 years ago

And if you happen to end up there any way, make sure you die properly and in grace. Aka, manage your bankruptcy properly, without any shenenigans and refusal to accept the inevitable.

gustavus• 2 years ago

This seems overly reductive. Why would you want to take business advice from people who weren't able to build a sustainable business. I get that starting a business is fraught with risk and there are factors outside your control that can impact, but the reasoning on this seems to basically boil down to. "There is nothing you can do to be successful and everything is at the arbitrary whims of fate."

Or to put it about another aspect

"Career advice plagued by survivorship bias." That souns equally stupid.

jongjong• 2 years ago

If you're successful then you can benefit from advice of other successful people because you live on an easier monetary playing field where just about any piece of advice you are given becomes self-fulfilling because of the amounts of capital involved.

Also, if some rich person gives you advice and you follow it, they (and their friends) will be more likely to invest in your company because they agree and believe in their own advice and they don't want to see your startup fail because of them. There is ego at play.

If you're not successful (which is almost everyone) then you should not listen to advice from successful people because it doesn't actually work in your situation. Instead, you should listen to people who failed and understand why they failed. They'll tell you useful things like "find a niche where you can sell your product 100% word of mouth" because they understand how search engines and social media works against you when you don't have capital or influential social connections. And these failed entrepreneurs probably know one person who was able to launch a small lifestyle business like that. This is realistic and achievable and minimizes the role of luck.

remram• 2 years ago

After 80% of the article explains survivor bias, we finally get to the subject (business advice), and this is the gripe:

It turns out Jim started by combing through 1435 companies looking for good candidates for the book, and picked eleven.

This to not survivor bias! Call it selection bias if you want, but it's plain old data manipulation!

mgh2• 2 years ago

"Choice" is often one of those: https://medium.com/@trendguardian/free-will-a-rich-fairy-tal...

Log_out_• 2 years ago

Chat gpt write some explanatory filler around a discovery.

borlanco• 2 years ago

We can learn from failures if we really want.

For example, see https://www.failory.com

takinola• 2 years ago

Ehh, you should always take general business advice for what it is. It is usually not a great idea to treat them as gospel given that for every best-practice, there is an exception. Instead, realize that some things are (probably) necessary but not sufficient for success. Also, try to understand why the recommended approaches succeeded. That way, you can examine for yourself if that particular bromide applies to your situation.

dang• 2 years ago

Business Advice Plagued by Survivor Bias - https://news.ycombinator.com/item?id=4314107 - July 2012 (1 comment)

Business Advice Plagued by Survivor Bias - https://news.ycombinator.com/item?id=768297 - Aug 2009 (36 comments)

throwawaaarrgh• 2 years ago

Good advice doesn't stop being good just because people stop following it. Ultimately success is a matter of effort.

turnsout• 2 years ago

If that were true, people who work harder at their small business would make more, but that is not the case.

Sohcahtoa822• 2 years ago

Ultimately success is a matter of effort

It's so sad that people still believe this lie.

It creates a victim-blaming mentality of assuming that anybody that failed simply didn't try hard enough.

Sometimes, the success of a business comes down to just being at the right place at the right time. Sometimes, it's just a matter of having rich parents that gave you enough seed money that you could actually dedicate time to your business rather than having to work 40 hours/week just to pay the bills before being able to spend any time on your business.

sedansesame• 2 years ago

I took "Ultimately success is a matter of effort" to mean only that.

Even if you were handed opportunities on a silver platter (ie. rich parents), you still had to put in your own effort somewhere along the chain to get the ball rolling.

If you never start, no matter how lucky or good your circumstances are, you will still be at 0%. Therefore, there's no success without effort.

karaterobot• 2 years ago

You hear about failure case studies too. I think it's more of a selection bias, or a narrative bias: they pick case studies that prove a point, the same way you look for and cite statistics and articles to support the point you were already going to make in an internet fight, rather than trying to represent the entire complexity of the domain you're squabbling in.

giantg22• 2 years ago

Most advice has bias. Of course the people giving business advice want to talk about their successes. Just like the people on social media post how perfect their lives are.

It's especially interesting to hear advice from people who lack empathy. Maybe high performers giving advice to someone with a disability. Or someone who got lucky that credits their hard work and denies luck had anything to do with it.

I'm tired of it. I'll look at some advice just for curiosity, but I'm done trying. What happens, happens. No point in repeatedly wasting effort.

WalterBright18• 2 years ago

Failure to learn from one's failures will induce inevitable further failure.

jfengel• 2 years ago

This bias is particularly dangerous, in that so much business advice comes down to "work hard and persevere". In the case of a business that's just not going to happen, this is pessimal advice that makes a bad situation worse.

bruce5113• 2 years ago

I think a fair amount of "common advice" is wrong. Things like "work hard", "you can be whatever you want", "persevere" .

There are truths in there; success does take hard work, but hard work does not lead to success. Success takes perseverance, but perseverance does not lead to success.

Baking bread requires time, but having time does not lead to bread.

You can do all the work, you can have most of the ingredients, but without yeast you don't get bread. It doesn't matter how much time, perseverance, work or dreams you put in.

Finding the right advice is hard because unless someone can see what you are doing right, it's hard to know what is missing.

Yes, sometimes the yeast is luck. But even knowing that is helpful. Luck (aka chance) can often be improved. I was lucky to land in the job I did, but I am least put myself in the right place at the right time.

The worst advice is something you are already doing (hard work perseverence) without success. It's the equivalent of "what you are doing is not working, but keep doing it anyway" which is terrible.

bruce5113• 2 years ago

Empathy is useful, but also a hindrance. I don't-want- to tell you your product is crap, your market is non-existent, your strategy is flawed, you are a terrible manager, your hard work is on things that don't matter, because you're a human and I have empathy.

But sometimes the advice you really really need is not platitudes that make you feel better, but hard hitting truths that (as a side effect) may make you feel useless.

-Good advice- that applies to your specific context, is hard to find. But it is invaluable.

giantg22• 2 years ago

That's still empathy because your catering to their true needs and not just their ego.

waprin3• 2 years ago

It’s good to be aware of survivor bias but the discussion around it has been overdone and leads to pointless defeatism.

The airplane example is the canonical example but also ironic because it’s an example where there was a ton to learn from survivors. Their first takeaway was logically inconsistent but eventually they realized that places without bullet holes were the most important to armor. Because planes shot in other places survived. If no planes survived they’d learn nothing but instead they learned something useful from the survivors.

It doesn’t change that a WW2 fighter pilot would need some luck to survive but if he took the right lessons from survivors and armored his plane in the correct places he’d improve his probability of surviving.

One of my favorite pieces of business advice is since 90% of businesses fail, start 10 businesses and you’ll probably succeed. Of course that oversimplifies things but so does the original statistic . It’s also useful advice that helps you re-frame “luck” as stochastic risk that you can manage. And learning ways to lower probability of failure is a great way to manage risk even if there’s always some element of randomness at play.

t8sr3• 2 years ago

If 90% of businesses fail and you start 10 businesses, you still have about 35% chance of failing at all 10 of them.

xvedejas• 2 years ago

This is assuming uncorrelated results too. As you observe more and more of your businesses failing, you would want to update your estimate of your own rate of failure. Each new failure in a string of only failures is slight evidence that your own rate of failure may be >90%, even if it's 90% on average for everyone.

waprin3• 2 years ago

Yes I understand basic math but I would implore you to improve your reading comprehension as I used the word “probably “ (which 65% qualified as) and emphasized we can’t eliminate luck but can influence it.

yesbut• 2 years ago

If 90% of businesses fail then just put armor on the ones with bullet holes.

WalterBright18• 2 years ago

The odds of being shot down in a B-17 were the same for the first 5 missions as for the next 25.

They definitely had a level of control over their fate.

paulryanrogers• 2 years ago

The risk compounds. It's like playing Russian roulette more than once. The risk for each trigger pull is the same. Yet taking that risk repeatedly means your odds of ending up dead are worse the more times you have to play.

gnicholas2• 2 years ago

When I first found Jason's blog, I was surprised not to see it posted here more frequently. Many of his old posts ring just as true today as a decade ago, and his writings about the personal aspects of startup life are unlike most of what you find written by successful founders.

lnwlebjel• 2 years ago

Second this, it's a great blog. I discovered it about 2 months ago and have been reading through the old posts ever since.

mkl3• 2 years ago

Well, it is posted pretty frequently, including old posts: https://news.ycombinator.com/from?site=asmartbear.com

gnicholas2• 2 years ago

Doesn’t ever make it to the front page? I’ve been here a decade and don’t ever remember seeing it there.

WalterBright18• 2 years ago

If you want to be a pop star, is it better to get advice from Taylor Swift, or your local garage band getting high school gigs?

XorNot4• 2 years ago

...I'm not sure what you think the answer to this is?

Sohcahtoa822• 2 years ago

For the most part, it's a rhetorical question.

But there's a massive trend of people born wealthy to attribute their success to hard work, rather than giving any credit to the fact that they had a massive safety net if they failed at their ventures. Every billionaire was born a millionaire.

Taylor Swift had a huge amount of support, both financial and emotional, from her parents. Her parents weren't millionaires, but they were decently well off, enough that they could move her to Nashville just to help put her career on a launch pad. She's extremely talented, but talent alone is extremely unlikely to be enough. You have to be able to meet the right people at the right time in the right place. All that together takes money and flexibility, which aren't things you earn by just working super hard.

hirvi74• 2 years ago

Honestly, I think it'd be better to get advice from both. Following either advice will unlikely yield the same results, but that doesn't mean either option is without something beneficial to offer.

lesuorac• 2 years ago

False dichotomy.

Get advice from a 2nd-hand source who has collected a bunch of 1st-hand sources and done analysis on them.

Same reason Wikipedia doesn't like primary sources; being a primary source doesn't mean you're correct. [1]

[1] https://en.wikipedia.org/wiki/Wikipedia:Identifying_and_usin...

paulpauper• 2 years ago

a statistician, so you will know how stacked the odds are

WalterBright18• 2 years ago

If you quit before you start, your odds are 0%.

ozim3• 2 years ago

For me „generic business advice” is like Taylor Swift explaining how to sing.

It is not going to make you sing like her.

So I’d go for advice to actual voice coach.

throwawayq34232• 2 years ago

The only thing Taylor Swift is qualified to advise about is how to succeed if you are born Taylor Swift.

myhf• 2 years ago

Why didn't the RAF just preemptively shoot holes in the locations of those red dots to make their planes more likely to survive?

throwup238• 2 years ago

It was cheaper to have the enemy do the work and waste the ammo.

Business advice plagued by survivor bias (2009)

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