The Failed Entrepreneurs Hiding In Their Garages -Mental Model 049

Survivorship Bias

The logical error of concentrating on people or things that ‘survived’ a process and inadvertently overlooking those that did not because of their lack of visibility.

 

Example: “…people who are lionized on magazine covers for saying no to a billion-dollar acquisition offer and taking it to $20 billion. You don’t hear about the losers, because the story isn’t as interesting. It’s not going to sell as many copies.” — Tim Ferriss

 

Another example comes from Michael Shermer’s article How the Survivor Bias Distorts Reality, in Scientific American. Here’s an email Shermer received from David Cowan of Bessemer Venture Partners:

 

“For garage-dwelling entrepreneurs to crack the 1% wealth threshold in America, their path almost always involves raising venture capital and then getting their start-up to an initial public offering (IPO) or a large acquisition by another company. If their garage is situated in Silicon Valley, they might get to pitch as many as 15 VCs [Venture Capitalists], but VCs hear 200 pitches for every one we fund, so perhaps 1 in 13 start-ups get VC, and still they face long odds from there. According to figures that the National Venture Capital Association diligently collects through primary research and publishes on their Web site, last year was somewhat typical in that 1,334 start-ups got funded, but only 13% as many achieved an IPO (81 last year) or an acquisition large enough to warrant a public disclosure of the price (95 last year). So for every wealthy start-up founder, there are 100 other entrepreneurs who end up with only a cluttered garage.” — David Cowan

 

Wisdom: “Ability is of little account without opportunity.” ― Napoléon Bonaparte

 

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Why Progress Relies on Death -Mental Model 048

Planck’s Principle

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it.

 

Example: Does Science Advance One Funeral at a Time? That’s the name of a research paper that shows that the premature deaths of elite scientists affect the dynamics of scientific discovery.

 

The study shows that following the death of elite scientists, other scientists who were not collaborators with the deceased star scientist became more visible. They were more able to get funding, get published and advance their novel ideas—that often contradicted the ideas the elite scientists had espoused.

 

Wisdom: “Science advances one funeral at a time.” ― Max Planck

 

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Extinction Isn’t The Only Time Evolution Stops -Mental Model 047

Punctuated Equilibrium

When a species has been alive for so long that they appear in the fossil record (the record of the occurrence and evolution of living organisms through geological time as inferred from fossils), they stop evolving. They reach stasis. Then when significant evolutionary change does occur we can see the species break into two distinct species – like humans and chimps.

 

Example: Gray Jay’s are a bird species that live in the conifer trees of Canada. The conifer trees are important to their survival. Gray Jays use conifer trees to store perishable food in the bark, especially in summer and autumn—in preparation of the cold Canadian winter. But it is not only for themselves, Gray Jay’s nest in the dead of winter and must feed their chicks.

 

There’s a problem. The Gray Jay population in Algonquin Park has been declining since the 1970s. Why? Conifer trees had been declining. Researchers showed that Gray Jay’s depend on conifers for survival because they were the best tree to preserve food. Food stored in summer, would most likely survive to winter when it was stored in a conifer tree.  

 

The decrease in the number of conifer trees is an existential threat to the Gray Jay. The conifer tree population will recover and the Gray Jay species will remain in stasis. Or the tree population declines, and either the Gray Jay dies out or the species evolve. Alternatively, some of the Gray Jays will remain Gray Jay’s, while a subsection evolves and becomes a new species.

 

Through this example we can see that significant evolutionary change can be as a result of geographical events—the decline of conifer trees.

 

Wisdom: “It is not the strongest or the most intelligent who will survive but those who can best manage change.” ― Leon C. Megginson

 

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The Cost You Never Notice -Mental Model 045

Opportunity Cost

The benefit a person or company could have received, but gave up to take another course of action.

 

Example: A university education has obvious costs such as tuition fees, housing and books. But their are also hidden opportunity costs: the wages that could have been earned or business started, the value of three or four years in that job, and the value of items purchased or interest earned with the tuition money.

 

Wisdom: “Economics is the study of how to get the most out of life.” — Tyler Cowen

 

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How A Psychic Will (Try To) Trick You -Mental Model 044

Confirmation Bias

The tendency to search for, interpret, favour, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.

 

Example: During psychic readings, listeners apply confirmation bias by focusing on the psychic’s statements that match their own lives. By making a large number of ambiguous statements, the psychic gives the client more opportunities to find a match. And it is the matches and not the misses that the client remembers, thus giving the feeling that the psychic has special powers.

 

Wisdom: “People put a lot less effort into picking apart evidence that confirms what they already believe.” ― Peter Watts

 

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Why Do You Drive Slower After Seeing A Car Crash? -Mental Model 043

Availability Bias

When making a decision, people rely more on information and events that are more recent, that were observed personally and that were more memorable.

 

Example: When people drive past a crash on the road, they start driving slower and more carefully. Their risk of crashing hasn’t changed, but the recent reminder makes them feel in danger.

 

Wisdom: “The eye sees only what the mind is prepared to comprehend.” ― Robertson Davies

 

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Are You A Victim Of These Biases? -Mental Model 042

Selection Bias

The selection of individuals, groups or data for analysis that is not random. That means that sample chosen is not truly representative of the real-world.

 

Example: There are many types of selection bias, including:

 

Sampling Bias: Some members of a population are more likely to be included than others. For example, many studies conducted at Universities rely on University students who are not representative of the population as a whole.

 

Clinical susceptibility bias: Having one disease can predispose you to have a second disease. If you are treated for the first disease, and then contract the second disease, it could erroneously appear as if the treatment of the first disease caused the second disease.

For example, postmenopausal syndrome (the disease) gives a higher likelihood for women to develop endometrial cancer. So when postmenopausal syndrome sufferers are treated with estrogen (the treatment) and subsequently develop endometrial cancer, the estrogen treatment can mistakenly be blamed for causing the cancer (when it was the predisposition not that treatment that cause it).

 

Wisdom: “Living is easy with [your] eyes closed.” ― John Lennon

 

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The Fallacy That Can Cause You To Attend A Justin Beiber Concert -Mental Model 041

Sunk Cost

A cost that has already been incurred and cannot be recovered.

 

Example: Imagine you got drunk and accidentally bought a non-refundable ticket to watch Justin Bieber. That cost is sunk—it is already incurred (you’ve purchased it) and you cannot return it.

 

At this point, you must beware of the sunk cost fallacy—the irrational behaviour of continuing something only because you’ve already incurred the cost. Having bought the Justin Bieber ticket, many people would fall victim to the sunk cost fallacy and attend the concert even though they did not want to attend.

 

Wisdom: “Pride costs us more than hunger, thirst, and cold.” ― Thomas Jefferson

 

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How Abraham Lincoln Persuaded A Jury Without Citing The Law -Mental Model 040

Ad Hominem

An argument is rebutted by attacking the person’s character or motive rather than attacking the argument itself.

 

Example: In one of his early jury cases, Abraham Lincoln used ad hominem when pitted against an experienced trial lawyer. The day was warm and when the trial lawyer took off his vest, Lincoln noticed something. He was wearing one of the new city-slicker shirts which buttoned up at the back. Or it was supposed to.

 

Lincoln addressed the jury, “Gentleman of the jury, because I have justice on my side, I am sure you will not be influenced by this gentleman’s pretended knowledge of the law. Why, he doesn’t even know which side of his shirt ought to be in front!”

 

Wisdom: “I always cheer up immensely if an attack is particularly wounding because I think, well, if they attack one personally, it means they have not a single political argument left.” — Margaret Thatcher

 

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