The survivorship bias – who’s left?

The current pandemic has the potential to change both the make-up and outlook of our population, leaving demographers, politicians and longevity risk consultants all asking the question - what will the population look like when all this is over? This is not just a question of who survives, but also of how the surviving population might change as a result of, well, surviving.

With a changing population, we will need to understand whether existing knowledge and understanding remains relevant in a post-COVID world. Key to this goal will be to understand a cognitive bias known as the survivorship bias.

The survivorship bias: the tendency to assume subjects that made it through a survival process are typical of the group that began the process.

The System

In a 2008 TV special called The System, UK magician Derren Brown gives a great demonstration of the survivorship bias. The show documents a lady who is approached about a system to predict winners of horse races. As the system repeatedly picks correct winners, she is emboldened to bet more and more of her own money on the next tip. Eventually it is revealed that Derren Brown is behind the system – but rather than being able to predict the winner of each race, he has been giving different tips to nearly 8,000 people, only presenting footage from the one person that happened to win five races in a row.

Before this reveal, the survivorship bias makes it easy to believe that Derren has developed a system to win at the races; the only person we know about has just won five races in a row. However, when attention is turned to how many other participants existed at the beginning of the process, it becomes clear that Derren has no better chance of picking the next winner than the next person! It is vital to consider the whole sample when assessing the likelihood of a given outcome.1

How good a stock would a stock picker pick

A classic example of the survivorship bias is in the assessment of a stock-picking asset manager. When looking to entrust the investment of your savings to someone, how do you assess whether they have the requisite skills to do a good job? It is common to look at past performance, assuming someone who has repeatedly picked high-performing stocks is skilled at stock picking. However, a stock picker that repeatedly picked bad investments would likely go out of business and the surviving pool of managers would end up heavily biased towards those making successful choices – some potentially only due to luck. When assessing the manager, it is more important to embrace their decision making methodology, rather than any specific outcome.

Try, try and try again

I am a firm believer that hard work and application increase someone’s chances of achieving an ambitious goal. However, the survivorship bias puts us at risk of the unrealistic expectation that all you need to achieve is to try hard.

We are awash with stories of highly successful people attributing their success to hard work and unrelenting tenacity. Missing from the debate, however, are the stories of all the people who tried really hard who did not achieve. Legendary Swedish football (soccer) player, Zlatan Imbrahimovic, is famed for his application on the training field. But we should remember, not every person who practices football every day ends up scoring an overhead kick from 30 yds at Wembley.

TV talent shows are particularly guilty of perpetuating this myth, encouraging deluded people that they will be the next Beyoncé just because they ‘really want it’. But for every success story on these shows, there are hundreds of contestants whose names are quickly forgotten. The boy band One Direction was perhaps the biggest success story from the UK’s X-Factor show. Speaking to the Belfast Telegraph a friend of Niall Horan, one of the band’s members, said “He (Niall) has inspired us all to believe that we can make something of ourselves if we try hard enough”. This is a dangerous sentiment: certainly, no matter how hard I try I will never become an international popstar like Niall. Similarly, even with years of hard work, Niall is unlikely to become the editor of such a fantastic series of articles as Club Vita’s Top Charts.2

 The idea that everybody is able to achieve success and prosperity if they try hard enough is the foundation of the American Dream. An unfortunate ramification of this ethos is that individuals are often blamed for their lack of success for having not tried hard enough. In reality, there are many barriers to upward social mobility and the myth that everyone has equal opportunities allows politicians to get away with implementing policies that perpetuate social inequality.

Sweet seduction of the silver screen

There are several common tropes in the movies that can lead to some unusual beliefs when paired with the survivorship bias. Initially unremarkable protagonists are common, being accessible and sympathetic characters to a wide range of people. As a movie develops, these unlikely heroes typically progress through a series of extreme events, ultimately succeeding against all the odds. Rocky ultimately defeats Ivan Drago, Peter LaFleur wins the dodgeball tournement, Stanley Ipkiss ends up with the girl of his dreams and Chris Pratt does not get eaten by dinosaurs.

Continual focus on these ‘survivors’ can lead us to think their stories are typical, resulting in beliefs such as “the nice guy always gets the girl”, “dinosaurs don’t eat Hollywood leading men” and “underdogs never lose”. Having previously captained the Hymans Robertson dodgeball team, I can assure you it is not as easy as Vince Vaughn makes it look!

The longevity effect

The need to control for a survivorship bias is common when trying to understand how long pensioner populations will live. Anytime we try to understand a given population we should ask ourselves if they have been through any kind of selection process where survival would somehow shape the characteristics of the resulting population.

For example, if a pension plan offers participants the choice between a cash lump sum and a regular income for life, would the act of making this choice affect the population who chose the regular income? People expecting to live shorter lives may be more likely to take the lump sum, meaning the remaining population will not look like an average plan where this option is not available.

Another example is playing out with the current pandemic. It is widely accepted that COVID-19 is hitting socioeconomic groups with differing severity – an effect I wrote about back in April. This means that surviving pensioner populations may well end up with very different socioeconomic characteristics than populations before the pandemic. This should be a central consideration for any pension plan embarking on an experience study of past data to set future mortality assumptions. Other survival characteristics may also need to be considered, such as whether surviving the pandemic causes any long term physical or mental health impairments, or on the contrary whether survivors are in some way more resilient in the long term.

It’s Life Jim…

The survivorship bias even touches on some of the great philosophical questions. A common argument for the religious belief of an absolute creator is that the exact configuration of physical properties of the universe is so unlikely to occur by chance, that there must have been divine intervention to guide it into a state capable of supporting life. This argument is a specific example of the survivorship bias known as the anthropomorphic principle: Life needs first to exist for anyone to question the fine tuning of the universe. Therefore, in any universe where this question is considered, the physical properties must necessarily be such that they support sentient life.

As far as I know, the survivorship bias does not come in to play with other great philosophical issues such as free will, life after death, the existence of numbers or why Sweden were more successful at the World Cup after Zlatan retired.

What do you think?

A saying often attributed to Winston Churchill is that “History is written by the winners”. I prefer an earlier version of this quote traced back to around 15 years earlier:

“History is written by the survivors” Social Forces, 1931

The key questions are: Who are the survivors? And how do they differ from those at the beginning?

1For those concerned for the participants, Derren does ensure that no-one taking part in his experiment ends up out of pocket.

2UK and Canadian versions also available

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