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The Cognitive Fallacy of Survivorship Bias

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As someone with experience in multiple startups, including leading a company that bootstrapped from inception to 150 people in three years, I’ve seen firsthand survivorship bias in action.

Survivorship bias is a cognitive fallacy that pushes you to either focus on successful examples while overlooking the failures that went unnoticed or by pushing you to strengthen your weaknesses instead of building on your strengths.

Understanding Survivorship Bias

Survivorship bias distorts your perception by emphasizing successful outcomes and pushing you to ignore failures. This means you're analyzing successful events, like companies and entrepreneurs without acknowledging the numerous others who followed similar paths but failed.

You might look at tech giants and try to emulate their strategies, believing that it will ensure your own success. However, for every successful company, there are countless startups that failed following the same recipe. Critical elements often lie in understanding why those ventures didn’t succeed.

The Myth of Well-Roundedness

There are many miths that sorround why companies succeed, and one of them is that in order to succeed a company needs to be well-rounded. This suggests that to be successful, one must excel in all areas, this is unrealistic and counterproductive.

Resources are limited by definition, striving for well-roundedness can lead to a dilution of focus. At a personal level, this means spending valuable time and energy on improving skills you are not naturally inclined towards. While it's essential to be competent in various areas, trying to excel in everything is a recipe for failure.

Case Study: The Myth in Practice

Consider an aspiring entrepreneur who idolizes a multi-talented CEO (Elon Musk, Bill Gates, Jeff Bezos, pick one). He might believe that to be successful, they too need to master every aspect of the business, from coding and marketing to sales and finance. This approach can lead to burnout and suboptimal performance across the board.

Instead, a more effective strategy is to identify one’s core strengths and build around them. For example, if an entrepreneur excels in product development, she might focus her efforts there and delegate or collaborate with experts in other areas. This approach optimizes performance and leads to better overall outcomes.

Building on Strengths: The Key to Success

I’ve found that great leaders understand the importance of focusing on their strengths. Rather than attempting to be proficient in every skill, I concentrate on what I do best and surround myself with a team that complements my abilities.

The Power of Specialization

Specialization is a fundamental principle in both personal development and team dynamics. By focusing on what you do best, you can achieve a level of excellence that is difficult to attain when spreading yourself too thin.

In my case, I primarily focus on technology strategy, product development, and innovation. While it's important for me to have a basic understanding of finance, marketing, and operations, these areas should be delegated to team members who specialize in them.

Building a Complementary Team

An effective leader build teams that compensate for her weaknesses and amplify her strengths. This approach not only enhances the overall capability of the organization but also fosters a culture of collaboration and mutual respect.

A Synergistic Approach

Jobs was acclaimed for his visionary leadership and focus on design and user experience, which were pivotal in Apple's success. However, his success was greatly complemented by his team, particularly Steve Wozniak, who handled the technical aspects of product development, and Tim Cook, who excelled in managing operations and supply chain efficiency. This synergy among Jobs, Wozniak, Cook, and other key team members allowed Apple to innovate and execute with unparalleled efficiency.

More about the synergies among Jobs, Wozniak, and Cook, in this Elad Gil article.

Delegation and Trust

Delegation is a critical skill. It involves entrusting tasks to teammates and empowering them to make decisions within their areas of expertise. This not only frees up your time to focus on your strengths but also develops the skills and confidence of the team.

A Strategic Partnership

Mark Zuckerberg effectively delegated responsibilities to Sheryl Sandberg (COO of Meta). He entrusts her with overseeing operations, including advertising, business development, and policy. This delegation allows Zuckerberg to focus on strategic vision and product innovation, while empowering Sandberg to lead and make decisions in her areas of expertise. This approach not only frees up Zuckerberg's time but also develops Sandberg's skills and confidence, contributing to Facebook's growth and success.

Avoiding the Trap: Practical Steps

To avoid the pitfalls of survivorship bias and the myth of well-roundedness, I’ve adopted a strategic approach to personal development and team building.

1. Self-Assessment and Focus

Identify your core strengths through honest self-assessment or feedback from trusted colleagues. Once you understand where you excel, allocate the majority of your time and resources to these areas.

2. Embrace Competence, Not Mastery

In areas where you are not naturally strong, aim for competence rather than mastery. This means acquiring enough knowledge to make informed decisions and communicate effectively with experts.

3. Build a Diverse Team

Recruit team members with complementary skills and experiences. Diversity in expertise fosters innovation and ensures that all critical functions are covered by specialists.

4. Delegate and Empower

Delegate responsibilities to team members and trust them to execute. Provide the necessary resources and support, but avoid micromanaging.

5. Continuous Learning and Adaptation

Stay informed about industry trends and best practices, but critically evaluate which ones are applicable to your unique context. Learn from both successes and failures, and be willing to adapt your strategies.

Case Study: Survivorship Bias in Sales Strategy

In one of my previous startups, we initially saw rapid growth through the organic adoption of our product by developers. This developer-driven growth was incredibly exciting and led to several enterprise deals, as developers within these companies pushed and pitched our product to their executives.

However, when we decided to shift our focus to enterprise sales, we encountered significant challenges. We assumed that our initial success with developers would translate directly to success with executives. This was a classic example of survivorship bias. We overlooked the fact that our enterprise deals had come from internal champions—developers who loved our product and advocated for it within their companies.

When we tried to sell directly to executives without first securing buy-in from developers, we struggled. Executives were often skeptical and required a different approach and value proposition than what had worked with developers. This misalignment highlighted how our reliance on past successes with developers led us to overlook the distinct needs and decision-making processes of executive buyers.

Lessons Learned

  1. Understand Your True Strengths: Our strength was in creating a product that developers loved. Recognizing this helped us refocus our efforts on nurturing developer relationships and leveraging them to reach executives.

  2. Tailor Your Approach: Selling to executives required a different strategy. We needed to understand their pain points and articulate how our product addressed their specific business needs.

  3. Leverage Internal Champions: Developers who were passionate about our product were invaluable in influencing their organizations. By empowering them with the right tools and support, we could facilitate the transition from developer advocacy to executive buy-in.

Survivorship bias in the World War II

During World War II, statistician Abraham Wald factored survivorship bias into his calculations to reduce bomber losses. The Statistical Research Group (SRG) at Columbia University, which included Wald, studied damage to returning aircraft and suggested reinforcing areas with the least damage. The bullet holes indicated where bombers could be hit and still return safely. Wald inferred that planes hit in undamaged areas were most likely to be lost, leading him to propose reinforcing those areas. His work became foundational in the field of operational research.

Conclusion

Survivorship bias and the myth of well-roundedness can lead organizations astray, diverting focus from core strengths and fostering unrealistic expectations. As a leader, I recognize these biases and adopt a strategy that leverages specialization and complementary teamwork.

As you reflect on your own leadership journey, ask yourself: Are you falling into the trap of survivorship bias? How can you better leverage your strengths and build a team that complements your weaknesses? By making these changes, you can navigate the complexities of business with greater clarity and effectiveness