Survivorship bias and Trading
I know you are also unaware of the term survivorship bias and right now scratching your head or googling it. Here’s a Wikipedia link to get information on the Survivorship Bias.
Survivorship bias is the logical mistake we make while thinking or decision-making process about something. We ignore certain facts and fail to think on the opposite side. Which might impact your decisions and outcomes.
Let me explain by some examples.
Startups: Nowadays everyone is thinking about starting a new startup, Including you 😀 . Why? Because startups make you rich in a big way. You can be master of your own destiny and enjoy a lavish life.
Wonderful isn’t it?
You are super wrong. According to the survey done by IBM in collaboration with Oxford University, Only 10% of Startups survive till the age of initial 5 years. God knows how many survive in the long run.
So, If the majority of Startups fail then why we are still thinking of taking risks?
Because the media and the Internet say so. They paint a rosy picture and show interviews of successful start-ups. They show success stories of individuals who seek after their fantasies and beats the chances. you feel so damn motivated after you see an interview with a smart young man, way younger than you, earning in millions. Books and the Internet are filled with articles on how to become a millionaire or how to start your startup?
Nobody talks about the remaining 90%. Everyone feels taboo talking about those. The astounding numbers of failures are not visible to the individuals, and only those who succeed are shown regularly.
The Misbelief: You should follow the successful people and their habits if you want to become successful like them.
The Truth: When disappointment ends up noticeably undetectable, the contrast amongst disappointment and achievement may likewise wind up unnoticeable.