The logical error of focusing on successful examples that passed a selection filter while ignoring the many failures that did not — systematically overestimating the probability of success.
Deeper Explanation
In investing, survivorship bias distorts virtually every performance study. Mutual fund databases only include funds that still exist — funds that closed due to poor performance have been removed, making the average surviving fund appear to outperform what actually happened across all funds. Survivorship bias inflates backtested strategy returns (strategies are tested on assets that survived the sample period), inflates success-story narratives (we read about the businesses that succeeded from garage startups, not the thousands that failed from identical starting conditions), and makes successful investors appear more skilled than they are (Buffett himself acknowledges luck in his birth circumstances and the economic environment he benefited from).
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