Survivorship Bias

SB is nothing but a logical error that you make when you consider only winners and the losers who have disappeared in the process are neglected.

Many an investor often start putting money in the stocks that are recommended by anchors at CNBC awaaz, ZEE business and other channels. On an average, only 2 of their 10 recommendations work the way as suggested. But the way they tout their survivors – those 2 stocks – lead amateur investors into believing their story. 

Hemant Ghai of CNBC Awaaz was recently barred by SEBI from trading in capital markets for the way he used his power and this bias to irrationally pump up the prices of the stocks he wanted to invest in. The moment he’d realize that significant people had poured money in it, he would sell those stocks with a profit.

Survivorship bias also plays a major role in your career and relationships. Be sure that you do your analysis and see the whole picture before making a decision. And as Charlie Munger said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”

Have a good night!