Survivorship Bias and Startup Hype

Luck plays a significant role in business success. Not just in the mere fact of success, but in the magnitude of any given company’s triumphs. We tend to overlook this reality because of a mental distortion called survivorship bias. It is a common cognitive failure, and a dangerous one because it obscures the distastefully harsh nature of the world.

We love to fantasize that emulating the habits of extraordinary entrepreneurs like Bill Gates and Elon Musk will catapult the most talented imitators to the stars. In reality, there are plenty of would-be titans of industry who simply weren’t in the right place at the right time. Even with a great product, they could have failed to make the crucial personal connection that would have accelerated their endeavor to the next level.

Survivorship bias is best summed up by a sardonic XKCD comic: “Never stop buying lottery tickets, no matter what anyone tells you,” the stick figure proclaims. “I failed again and again, but I never gave up. I took extra jobs and poured the money into tickets. And here I am, proof that if you put in the time, it pays off!”

“The hard part is pinning down the cause of a successful startup,” a pseudonymous commenter on Hacker News wisely noted. “Most people just point at highly visible things,” such as hardworking founders or a friendly office culture. “The problem is that this ignores the 5,000 other startups that did all those same things, but failed.”

Ambitious people with incisive minds may be fewer than schmucks, and certainly multi-billionaire CEOs tend to be both brilliant and driven. Yet there are scads of brilliant, driven people who will never make it onto the cover of a prestigious magazine. Or any magazine.

Consider the mythology around hoodie-wearing college dropouts. Y Combinator founder Paul Graham once joked, “I can be tricked by anyone who looks like Mark Zuckerberg.” The quip is funny because it mocks a real tendency among venture capitalists: Pattern-matching to a fault.

In the same vein, a stunning proportion of partners at VC firms graduated from a handful of tony universities, as if the seal on a person’s diploma were what indicated investing abilities. (Granted, the incidence of leveraged social connections and postgraduate degrees may amplify that trend.)

Steve Jobs, along with Zuckerberg and Bill Gates, became fantastically successful after quitting school to start a company. “How many people have followed the Jobs model and failed?” Scientific American asked rhetorically in 2014. “Who knows? No one writes books about them and their unsuccessful companies.”

The press inadvertently helps perpetuate survivorship bias. People find famous entrepreneurs fascinating and inspirational, so journalists write about them extensively. The general public is primarily interested in the fates of companies that are household names or close to that status. And of course, reporters themselves are susceptible to survivorship bias just like anyone else. This is reflected in their coverage.

So what’s the antidote? Well, it’s boring: Being careful and thorough. Make sure to look for counterexamples whenever you think you’ve identified a trend or a pattern. Resources do exist, although not always on the first page of Google results.

For example, CB Insights compiled a list of 242 startup postmortems from 2014 through 2017. The analysts wrote, “In the spirit of failure, we dug into the data on startup death and found that 70% of upstart tech companies fail — usually around 20 months after first raising financing (with around $1.3M in total funding closed).”

Most of all, don’t let the headlines rule your worldview. “The press is a lossy and biased compression of events in the actual world, and is singularly consumed with its own rituals, status games, and incentives,” as three-time SaaS founder Patrick McKenzie put it.

Listen to Walter Lippmann, in his 1922 book Public Opinion. “Looking back we can see how indirectly we know the environment in which nevertheless we live,” Lippmann wrote, reflecting on the inaccuracies of tick-tock reporting during World War I. “We can see that the news of it comes to us now fast, now slowly; but that whatever we believe to be a true picture, we treat as if it were the environment itself.”

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The Label Is Not the Object

The label is also not the surface, nor the entity, nor [insert appropriate term].

Here’s another map-territory relationship that I’ve been thinking about: Labels and objects. The function of a label is to set expectations. It tells you how you’re supposed to think about whatever underlying thing it has been applied to.

Often this is banal, as with a drawer labeled “forks.” There is no need to devote mental processing power to the full complexity of each multi-pronged implement.

Labels on humans deserve more scrutiny.

Personally, I’ve always been a sucker for categorizing myself. Myers-Briggs (I’m a consistent INTJ), the political compass (I wander around the lower middle), etc. I know that aside from the Big Five, these designation systems don’t mean much. But they’re fun! And comforting, because I can feel like I’ve situated myself relative to other people.

Labels become unwieldy when you fluctuate between multiple categories or when you would need a Venn diagram to properly lay out your position. Think of the hyphenated Ethnicity-or-Country-of-Origin-American — manageable, but awkward.

For a while I described myself as a “cynical optimist” (yes, this coincided with my arguing-about-religion phase). It was cheesy, but I was trying to encapsulate the blend of sardonic and sunny that I wanted to project.

Now I have a hard time summing up my political views. Left-libertarian? Neoliberal? Socially liberal, fiscally conservative, but jkjk I’m only fiscally conservative in a selective way? It’s harder now than it used to be, since I’ve learned to be far more uncertain about any given policy choice. (Generally speaking, I believe in markets and competition, but the implementation details are hard to work out.)

Paul Graham wrote in 2009:

I think what religion and politics have in common is that they become part of people’s identity, and people can never have a fruitful argument about something that’s part of their identity [because disagreement feels like a personal attack]. By definition they’re partisan. […] If people can’t think clearly about anything that has become part of their identity, then all other things being equal, the best plan is to let as few things into your identity as possible.

Graham concluded, “The more labels you have for yourself, the dumber they make you.”

What I like most about Graham’s framing is that it puts you in charge of your identity. Your identity isn’t something that happens to you, imposed by the rest of the world, but something that wells up out of you and is displayed to the world. It’s your job to filter and shape it.

My friend Way Spurr-Chen wrote wrote a lovely, encouraging essay two years ago about the process of identity self-management:

If you think about integrating a new sense of self as simply moving from one place towards another place, it seems less daunting. You can always go back to where you were before (and I don’t know about you, but I reverse my improvements all the time). Instead of being a daunting undertaking, you can turn your identity goals into a sort of play. Why not explore (metaphorically and literally) different parts of your potential? Why not see how you regard yourself when you have certain identity traits?

Circling back to labels: They have a tendency to stay stuck. You might end up adding spoons to your fork drawer but never switching out the label for a new one that says “silverware.” And then guests get confused looking for spoons.

Is it necessary to label yourself? Probably not, if you’re the sort of person who can mentally avoid it. (I’m not.) Other people will continue categorizing you regardless — there’s no escaping that. I suppose thoughtful, self-applied labels can be a kind of defensive maneuver.


Originally posted on Substack.

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Filters, Funnels

Gotta restrict the inflow somehow.

Thinkin’ bout selection effects. In particular, adverse selection. The concept has been on my mind since February, brought top-of-mind by this Twitter exchange:

See also: Siderea’s “asshole filter,” summed up by Reddit user Kinrany as “issuing a rule and not enforcing it can lead to encouraging people to break the rule and offending people who don’t want to break the rule.”

Some industries have adverse selection effects. Journalism, for instance (writes the myopic journalist, obsessed with her dysfunctional industry). There’s a half-joke among reporters that you don’t go into media if you’re able to do anything else. And it’s true — if you have any common sense, along with the ability to put up with sycophantic corporate nonsense, then you’ll go make more money in PR or marketing.

It’s similar to the saying, “Those who can’t do, teach.” Those who can’t do, chronicle.

But of course there’s an “on the other hand.” The terribleness of journalism, as much as it repels competent professionals, also filters for people who are really passionate about reporting. (Plus those of us, myself included, who have a bizarre craving for attention from strangers.)


Originally posted on Substack.

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Perception, Possession

To have and to hold, cogito ergo sum.

The map is not the territory, as they say. A map (and there are various kinds) is an interpretative layer on top of some underlying substance. It would be hard to handle the world without maps, but they are necessarily reductive. As I wrote in 2016:

[N]o map is a 1:1 representation of reality — that would be a duplicate, or a simulation. Rather, our maps give us heuristics for interpreting the lay of the land, so to speak, and rules for how to react to what we encounter. Maps are produced by fallible humans, so they contain inaccuracies. Often they don’t handle edge cases well (or at all).

Nevertheless, I like mental models [which are one of the types of maps]. They cut through all the epistemological bullshit. Instead of optimizing a mental model to be true, you optimize it to be useful. An effective mental model is one that helps you be, well, more effective.

Although the map is not the territory, and we recognize this, a map can still dictate how the territory is perceived. How it is navigated. Which features of the terrain are considered salient. Maps are powerful and people vie for control of the ones that they consider influential. (Consider the recent kerfuffle over a certain New York newspaper’s op-ed section.)

Artwork by Ganesha Balunsat.
Artwork by Ganesha Balunsat.

Of course, you can diverge from a given map, or improve it, or substitute a new one. But even switching between existing maps is difficult and can take time, although in my experience it’s possible to develop multi-map skills.

The LessWrong wiki points out that because the map is not the territory, manipulating the map only affects the map. “If you change what you believe about an object, that is a change in the pattern of neurons in your brain. The real object will not change because of this edit.”

However: “The map is a separate object from the territory and the map exists as an object inside the territory.” For example, your thoughts and ideas about yourself are created within — are even created by! — the entity that they attempt to understand. It gets recursive very quickly.

There is no requirement that you perceive the world as it is. I’d go as far as saying that accurate world-perception is 1) a nightmare to judge one way or the other, since any judgment would be subjective, and 2) not intrinsically noble.

You can post-process your raw intake into whatever form is most useful to you. In fact, your brain already does post-processing automatically, from the sensory level on upward. When its output is particularly debilitating, we turn to medication or suggest cognitive behavioral therapy. Thus the “meme yourself into X” concept.

Seeking and synthesizing meaning from whatever chaotic milieu you occupy is a way to own the world. (I find it immensely satisfying.) There’s a passage from Cormac McCarthy’s masterful Blood Meridian:

Whatever exists, he said. Whatever in creation exists without my knowledge exists without my consent.

He looked about at the dark forest in which they were bivouacked. He nodded toward the specimens he’d collected. These anonymous creatures, he said, may seem little or nothing in the world. Yet the smallest crumb can devour us. Any smallest thing beneath yon rock out of men’s knowing. Only nature can enslave man and only when the existence of each last entity is routed out and made to stand naked before him will he be properly suzerain of the earth.

In the context of Blood Meridian the idea is dark, because that’s the nature of the novel. But in the context of our lives, I think knowledge-based dominion is an empowering concept.

You cannot rule the world. Or even if you can, it won’t stop you from becoming Ozymandias. We all meet his fate, on varying levels of grandeur. But you can bring the world into yourself and command its tulpa to do your bidding.


Originally posted on Substack.

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Social Cohesion via Memes

“The actual propositional content of doctrines has little to do with how religion works socially. Far more than the content of faith as such, what makes religion religion are the images and rhetoric loaded with atavistic and esoteric archetypes (chaos; order; Kek; frogs; a ‘God Emperor,’ to use a common 4chan appellation for Donald Trump) that tend to propagate virally, independent of a centralized source, because they tie into the cultural zeitgeist or answer some cultural need. […] Every time a meme is replicated or a symbol is reused, it only strengthens the socially determined bond of meaning.” — Tara Isabella Burton

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