As I reflect on my experience as an entrepreneur, I often think back to a chance encounter I had on a tram. I was visiting a city I once called home, and I decided to hop on the tramway—a simple act, but one that led to an extraordinary coincidence. Just as I was about to board, an old friend of mine stepped off the tram, and we reconnected after years apart. If I had been there a few minutes earlier or later, or even used a different door, we would have missed each other entirely. It was one of those moments that felt almost magical, like the universe had aligned perfectly. But as I thought more about it, I realized that this experience was a perfect example of something I’ve encountered often in the startup world: survivorship bias.
Now, you might be wondering, what does a chance meeting on a tram have to do with startups? Well, it’s all about how we remember certain events and how those memories shape our perceptions of success. That moment on the tram stands out in my mind precisely because it was so unlikely and yet so significant to me. But what about all the times I narrowly missed someone, or all the people I didn’t happen to meet by chance? Those moments fade into the background, forgotten because they didn’t result in anything remarkable. And this is exactly how survivorship bias works.
Survivorship bias is a cognitive bias that causes us to focus on the successes we see and ignore the countless failures that are invisible to us. It’s the reason we hear so much about the Netflixes of the world—the scrappy startups that defied the odds, took on industry giants like Blockbuster, and came out on top. But for every Netflix, there are dozens of startups that tried to do the same and failed. These failures don’t make headlines, and so we don’t think about them. As a result, we start to believe that success is more common, or more easily achievable, than it actually is.
Take, for example, the story of Netflix itself. We’ve all heard the tale of how Blockbuster laughed off the idea of buying Netflix for a mere $50 million, only to watch as Netflix went on to revolutionize the entertainment industry. It’s a classic underdog story, one that’s been told and retold in countless business books and articles. But what about the other startups that also tried to disrupt Blockbuster and failed? Companies like Reel.com, which aimed to bring video rentals online, or Movie Gallery, which tried to compete with Blockbuster by expanding aggressively but ultimately went bankrupt. These companies had big dreams and bold ideas, but they didn’t make it. And because we don’t hear about them as often, we forget that the road to success is littered with failures.
Survivorship bias can be a dangerous trap for startups. When we only focus on the companies that made it big, we start to believe that success is just a matter of following the right steps. We think, “If I just do what Netflix did, I’ll be successful too.” But this kind of thinking ignores the unique circumstances that each company faces. Netflix’s success wasn’t just about having a good idea—it was about timing, execution, and yes, a bit of luck. And even Netflix had its missteps along the way, like the ill-fated decision to split its DVD rental service into a separate entity called Qwikster, which was quickly abandoned after a major backlash.
So, how can we as entrepreneurs avoid falling into the trap of survivorship bias? One way is to make a conscious effort to study failures as well as successes. It’s easy to find case studies on companies that made it big, but it’s just as important to learn from those that didn’t. What went wrong? What challenges did they face that they couldn’t overcome? By understanding the reasons behind these failures, we can better prepare ourselves for the challenges that lie ahead.
Another way to combat survivorship bias is to focus on data rather than anecdotes. It’s tempting to model our strategies after successful companies, but we need to remember that every startup operates in a unique context. What worked for one company might not work for another. Instead of trying to replicate someone else’s success, we should be looking at our own data and making decisions based on what’s happening in our market, with our customers, and with our resources.
Flexibility is also key. Startups often get caught up in trying to follow a “proven” path to success, but the truth is, there is no one-size-fits-all formula. We need to be willing to pivot when necessary, to adapt to new information, and to recognize when a strategy isn’t working. This kind of agility can make the difference between success and failure.
Finally, we need to set realistic expectations. The stories we hear about successful startups often gloss over the struggles, the failures, and the near-misses. It’s important to remember that success is not guaranteed, and that the journey will likely be full of setbacks and challenges. By keeping our expectations grounded in reality, we can avoid the frustration and disappointment that comes from chasing an unrealistic ideal.
In the end, my chance encounter on the tram was just that—chance. It was a reminder that sometimes, things just happen in a way that seems remarkable, but that doesn’t mean they’re common or repeatable. In the world of startups, it’s easy to get caught up in the success stories, but we need to remember that for every success, there are countless failures we never hear about. By being aware of survivorship bias and actively working to counter it, we can make smarter decisions and increase our chances of achieving our own version of success.
So the next time you hear about the latest startup that made it big, take a moment to think about the ones that didn’t—and what you can learn from them.