Data Deceptions: Survivorship Bias—Learning the Wrong Lessons from Success

"Winners write history, but losers leave the most valuable lessons."

(https://xkcd.com/1827/)

Small business owners often look at successful businesses for inspiration. It makes sense—why not learn from those who "made it"? But what if the real lessons are hidden in the businesses that failed?

This is the danger of Survivorship Bias, a statistical trap where we focus only on the "winners" and ignore the ones that didn’t make it. This can lead to misguided decisions, overconfidence, and missed risks.

What is Survivorship Bias?

During World War II, the U.S. military studied planes that returned from battle, marking where they had been hit. Their initial plan? Reinforce those areas. But statistician Abraham Wald pointed out the real insight—they were only looking at planes that survived. The ones that got hit in other areas never made it back. The military instead reinforced the unmarked spots, saving countless lives.

This same mistake happens in business all the time.

How Small Businesses Fall for Survivorship Bias

1. Copying Successful Businesses Without Seeing the Full Picture

   • A startup sees that high-growth companies spend heavily on marketing and assumes spending more = success.

   • What they don’t see? Most businesses that spent heavily and failed never made the headlines.

2. Ignoring Why Competitors Failed

   • A business only studies successful coffee shops and ignores the 10 others that failed on the same street.

   • The lesson isn’t just what worked—it’s what didn’t work and why those businesses failed.

3. Overestimating Your Chances of Success

   • Many small businesses underestimate risk because they only see survivors.

   • Example: Looking at thriving restaurant chains and assuming opening a restaurant is a good bet—while ignoring that 80% of restaurants fail in the first five years.

Why This Challenge is Especially Important for PeerView AI

At PeerView AI, our goal is to give you the full picture of your peer group—helping you understand where your business stands relative to others. But there’s a natural challenge:

• Data on successful businesses is easier to find.

• Struggling or failed businesses often disappear from datasets.

This introduces a natural bias into industry benchmarks, making it harder to see the true distribution of success and failure. That’s why we constantly work to dig deeper, uncover missing insights, and provide a more complete view of the market.

Our job isn’t just to show you where the winners are—it’s to help you see the full playing field, so you don’t fall into the same traps others did.

How to Avoid Survivorship Bias

1. Look at the Full Data Set – Study both successful and failed businesses in your industry. Ask: What made some fail?

2. Seek Out Failure Stories – Instead of just reading about billion-dollar startups, look at business post-mortems to learn what went wrong.

3. Ask ‘What’s Missing?’ – Before acting on business advice, consider: Is this based only on survivors, or does it include failures too?

Final Thought

Success is easy to see, but failure is often where the best lessons are found. If you only study survivors, you might follow a path full of unseen pitfalls. Smart business owners don’t just ask, "What did winners do?"—they also ask, "What did the failures miss?"

At PeerView AI, we take this problem seriously—working to ensure that the insights we deliver are based on the full view of the world, not just the parts that are easiest to measure.