Survivorship Bias 4 – The Secret Sauce

This is the fourth and final post about the survivorship bias. Be sure to check out the first, second and third, too (“The Concept,” “Why It Matters,” and “Application to Our Situation”).

As you may remember, the survivorship bias is the skewing of conclusions about gathered data toward the input acquired from surviving sources without adequate consideration for the data on what could have been learned about what did not work from those who are no longer around.

We have explored why we should care and a little about the fact that it is directly applicable to real estate investing or entrepreneurship. We talked about luck being where preparation meets opportunity, and how that is only half the story. Interestingly, the other half of the luck story is a key ingredient in the secret sauce of success.

It turns out that luck is a misnomer. Chance is a significant factor in all our lives. If you had been one car farther back, the guy that ran the red light would have hit someone else’s car. If you had skipped the event where you met your significant other, you might never have met him or her. If you had not taken that route home, you would not have noticed that distressed property that became a profitable rehab for you. It turns out that some people are better than others at interacting with chance. They manage their probabilities better. The thing about probabilities is that it is a numbers game. The more coins you flip, the more “heads” you will see.

Here is what David McRaney said in his blog on this topic:

It might seem disheartening, the fact that successful people probably owe more to luck than anything else, but only if you see luck as some sort of magic. Take off those superstitious goggles for a moment, and consider this: the latest psychological research indicates that luck is a long mislabeled phenomenon. It isn’t a force, or grace from the gods, or an enchantment from fairy folk, but the measurable output of a group of predictable behaviors. Randomness, chance, and the noisy chaos of reality may be mostly impossible to predict or tame, but luck is something else. According to psychologist Richard Wiseman, luck – bad or good – is just what you call the results of a human beings consciously interacting with chance, and some people are better at interacting with chance than others.[1]

Notice that he said “consciously interacting.” That means they acknowledge chance and apply thought and strategy to how they deal with it. McRaney continues,

Wiseman speculated that what we call luck is actually a pattern of behaviors that coincide with a style of understanding and interacting with the events and people you encounter throughout life. Unlucky people are narrowly focused, he observed. They crave security and tend to be more anxious, and instead of wading into the sea of random chance open to what may come, they remain fixated on controlling the situation, on seeking a specific goal. As a result, they miss out on the thousands of opportunities that may float by. Lucky people tend to constantly change routines and seek out new experiences. Wiseman saw that the people who considered themselves lucky, and who then did actually demonstrate luck was on their side over the course of a decade, tended to place themselves into situations where anything could happen more often and thus exposed themselves to more random chance than did unlucky people. The lucky try more things, and fail more often, but when they fail they shrug it off and try something else. Occasionally, things work out. [2]

Phil Plait, an astronomer and leading voice in the skeptical movement, stated, “The only way you can spot [survivorship bias] is to always ask: What am I missing? Is what I’m seeing all there is? What am I not seeing? Those are incredibly difficult questions to answer, and not always answerable. But if you don’t ask them, then by definition you can’t answer them.”[3]

So, avoiding survivorship bias in order to see more of the big picture is part of the secret sauce…because it involves liberal applications of curiosity. A ferocious curiosity is something you can learn. How about luck? That involves curiosity, too. Lucky people seek out new things to try, situations rich in unpredictable opportunities, and the unscripted but positive side of randomness. They know it’s a numbers game so they make their numbers bigger in all the important ways. You, too, can achieve bigger numbers. It will not require magic for you to begin casting a wider net, identifying more sources for leads, sticking with something that is working, abandoning unproductive paths, and making better use of leads you already have with better follow up. Don’t buy another book first or attend another seminar first. Start developing that ferocious curiosity and start leveraging chance. Get out of your rut and start looking for what you don’t know you don’t know. Be open to opportunities you were not expecting or seeking, Open your mind. Constantly ask, “What am I missing?” Intentionally avoid the survivorship bias and learn as much as you can learn from non-survivors, too.

Stop being the person looking for a 2-inch, gold-plated needle in a haystack. Start being the person digging into a haystack for anything that might be useful. After all…

… despite how it may seem, success boils down to serially avoiding catastrophic failure while routinely absorbing manageable damage.[4]

If we focus too much on keeping things nice and neat, tidy and controlled, and only go where we know how things will turn out, we are limiting our “luck.” The luckiest—the  “survivors”—go where they cannot predict the outcome, they put themselves out there more frequently, they explore new avenues voraciously, and they exhibit ferocious curiosity. Learn from non-survivors about what does not work. And go out there and massively increase your own “luck!”[5]


[2] ibid.

[3] ibid.

[4] ibid.

[5] If you want to read the whole post by Thomas S. Buckell, check out I learned about it by reading a reprinted blog post by Charles Hugh-Smith and quoted at The latter was discussing things we know that we know, things that we know we do not know, and things we are not even aware we do not know.

Survivorship Bias 3 – Application to Our Situation

If you have not figured out yet what “survivorship bias” is, go back and read one or both of the prior posts (“The Concept” and “Why It Matters).

When I was working in the computer industry, I knew folks who were awesome salespeople. Many were “naturals.” It seemed as natural to them as breathing. They learned some ways to improve, but they had started out great. Most could not really teach how they did it because they did not understand how they did it. They could teach only some of what to do and what to avoid. Others, who studied sales diligently and applied what they learned in order to become awesome, were great teachers. They understood what was behind their success and could share it with others.

I suggest to you that unless a guru has spent significant time studying it, they only THINK they can teach someone else to repeat their success. They tell you about their lemonade stand as a kid or their lawn-mowing business. They tell you about their first rehab on a shoestring.They teach you the processes they used, some of the knowledge they gained, and may even give you some things to avoid. They intentionally or unintentionally leave out some key information you will need in order to come close to replicating their success. Often they do not even realize what it is that they do differently from others that is making the difference.

We often attribute at least some of their success to “luck.” And when it does not go as well for us, we conclude our luck is not as good as theirs was. Amy Hempel said, “There is no such thing as luck. Luck is where preparation meets opportunity.” Oftentimes that preparation took hard work, and being in the right place at the right time for that opportunity took more hard work. That is all true, but it’s still only half of the story.

One of the lessons I learned several decades ago when I was a high school physics teacher was that the parade of motivational speakers hired every year by the administration traded on false hope. All that was required to hit the speaking circuit was some level of success and a big enough ego to go out and do it. (Of course, that’s true of most consultants, trainers and seminar gurus, too, I suppose. Maybe even bloggers.) By adding some good marketing, they could trade in their textbooks and classrooms for stages and much bigger paychecks. The techniques they preached to us on how to be successful merely fit their personality, skills, and experience in that specific situation at that particular time in that location with that outside support, etc. None of those conditions fit our situation, so attempts to replicate their success were futile.

Sadly, it applies to real estate investing or starting a business, too. The only gurus I pay much attention to these days are those whose success depends on their ability to make me successful. That is called “alignment of interest.” Even then what I have learned about the survivorship bias is going to change how I view and apply what they teach.

We need healthy doses of skepticism when confronted with yet another sales pitch, yet another seminar, yet another workshop. Yes, we can gain some new knowledge. But it will still take hard work, focus, and persistent discipline to convert that new knowledge into success. What are the chances the new approach has any greater probability of success than what we are currently doing or have tried before? What we really need could very easily be to just do what we are now doing, but do it smarter, harder, longer or all of the above

Next time we will look at the lessons about the survivorship bias that we can apply to have a better shot at the success to which we aspire. Don’t miss it!

Survivorship Bias 2 – Why It Matters

Last time I explained the concept of “survivorship bias.” That is the danger of focusing so much on what works that we fail to learn from what does not…since it is usually only the successful survivors that are around to query. We are then tempted to copy ALL that the survivors did as though their whole formula is key to why they were successful. More often than not we try, but cannot replicate what they did, so we get discouraged or disparaged, and we quit.

If we studied the factual data, we would discover that typically only about 1% or fewer excel at anything, a bunch more get adequate enough results to gain some recognition and keep plugging away, and the vast majority of us better have a good attitude…and other options. This is true in sports, business, music, art, finance and almost any other human endeavor you can name. It is certainly true about real estate investing.

Non-survivors—I hesitate to call them “failures”—rarely if ever get paid for their advice on what NOT to do. First, most disappear. They quit and you don’t see them again. If any keep plugging, we do not put much stock in what they could tell us. After all, they have not accomplished what we hope to accomplish. The proof of the value of their experiences is in their results, right? Not necessarily! Thomas Edison was quite open about having learned 10,000 things that would not work to make an electric light bulb. He did not view that knowledge as “failure.”

Similarly, much of what we have learned in life—as in business—has come from trying something that did not work or that ended badly. The next time we did not do it that way. You probably learned the same lesson I did as a young child about sassing my parents. In my investing I have learned painful and expensive lessons about trusting a partner too much, inadequate protection in contracts, poor legal advice, insufficient due diligence, the downside of being a landlord, and much more. I am sure you can supply a similar list from your experience.

The survivorship bias matters when it blinds us to valuable lessons we can learn from non-success, like what to avoid, what did not work, etc. It is the rough equivalent of trying to drive your car with half the spark plugs missing. You’ll be better off if they are all there.

Next time, in the final installment on the survivorship bias, we will summarize some key lessons on how to avoid the bias and some foundational keys to success that the gurus generally do not even realize about themselves. It turns out that these keys are key ingredients of the secret sauce behind most success. You can apply them to ANY guru’s teaching. Don’t miss it!

Survivorship Bias – The Concept

I just read a fascinating blog post that has nothing to do with real estate or entrepreneurship…and yet has everything to do with finding success. It was about e-books and was written by a best-selling author. It introduced me to the idea of “survivorship bias.” Let me share what I learned and how it applies to us.

The survivorship bias describes our tendency to put great stock in trying to learn from the few successful survivors while making no attempt to learn from the multitudes doing the same thing who did not get those results. Without comparing the two sets of experiences, we cannot truly discern the key aspects that made the difference. We assume that copying the successful as closely as possible will also make us successful. More often than not, it was a combination of many things, some of them more important than others. This applies to fad diets, stock market investing, products advertised with testimonials, and seminar gurus, among other things.

We are not the only ones who fall into that trap. The military almost did it during WWII when they were exploring what to reinforce by studying damage on bombers that made it back to base. The reality was that the surviving bombers successfully made it back with that damage. The damage that really mattered was the deadly damage to those planes that did not make it back. Companies do it, too. Have you ever been given a satisfaction survey? Were you surveyed after you decided NOT to purchase their product or after you bought it? Usually it is the latter. Without going further, they cannot learn why most people did NOT buy. All they can learn is why some did.

Over the next few postings I am going to explore this further. In the fourth installment I will summarize the very important lessons for all who truly want a level of success that has eluded them so far. They are key ingredients in the “secret sauce” behind most success. Don’t miss it!

Sprint or Marathon?

How do you think of how your work in and on your business or that new initiative you launched…or perhaps your marketing program(s)? Do you view them as a sprint or as a marathon? A sprint is a short-term, all-out effort to reach a specific goal. A marathon is a steady, long-term commitment to reach a bigger or more distant goal. There is a time and a place in business and real estate investing for both approaches.  It is good to know when to apply each.

In a marathon you pace yourself, expending enough effort to keep pressing forward on the pace you need in order to go the distance and meet your goal. Endurance matters. Planning and knowing yourself matter. In  a sprint you go all out with a burst of energy designed to do the same thing: Go the distance, meet your goal before your energy is depleted. Planning and knowing yourself matter…and preparation is extremely important. In both you have a finite amount of energy to expend. The rate at which you expend it is dependent on the distance to be covered.

In business we need to also acknowledge that we have only a finite amount of energy to expend. If you wear yourself out in a perpetual sprint, fatigue will impact your decisions and productivity. You will be forced to maintain that pace to just keep up. Lower productivity and mistakes you will later need to correct will displace what could have been creative time, if you were more rested. Pace yourself in your ongoing activities to run the business, including marketing. Save the sprints for meeting deadlines. However, take your deadlines seriously. Give it “sprint” energy. Marathon pacing to meet deadlines will assure that they slide or are met with less than stellar quality.

So, sprint energy for short-term deadlines and goals, marathon energy for long-term goals. Yet even marathoners know they need recovery time between races. Give yourself appropriate breaks!

Facebook Blasé

What part of your business don’t you see? We do not always know what it is we do not know. Similarly, we are not always aware of what we do not see, what has become so familiar that it has “disappeared” from our attention.

For instance, I drive past the Facebook main campus and their huge “Like” thumb symbol out front about 5-6 times a week. The only time I notice it is the 2-3 times a month that I see yet another set of visitors taking their pictures in front of the sign. Then I am reminded again of how much we in Silicon Valley take for granted our proximity to the headquarters of some of the biggest names in business. Facebook, Google, Cisco, Intel, Hewlett-Packard, Oracle, McAfee, eBay, and many more have become part of the landscape. They are no longer larger than life–which was a bit like I perceived them 20+ years ago when I first moved out here, and like today’s snap-shooters undoubtedly see them. I’ve been to meetings on their campuses, know people who have worked there, and barely turn my head when I drive by. They have “disappeared” from my attention due to familiarity.

The same thing can happen in your business. A brick and mortar facility can start to look a little ragged: scratches here, smudges there, clutter on the counter, outdated decor, etc. When was the last time you tried to see your place through the fresh eyes of a new visitor? What do they see? If you are not good at that, ask a friend to take a bunch of digital pictures for you like a new visitor would see the place and then find a tool online that can turn them into mirror images, flipped left for right. That is a trick we can use to cancel the brain’s filtering of that to which we have become accustomed. It will look different enough that you have a better chance of seeing the issues. Or stop by a competitor and see what you see. It may give you some ideas of where to look for similar issues in your business (or even some ideas of things you could spruce up).

Or how about real estate investing? What is it about what you are doing or not doing that you are not noticing? Do you have a team of advisers whom you consult regularly to guide you? (Attorney, insurance broker, CPA, coach, etc.) Ask them to ask you some tough questions.

I used to put a 3×5 card at some random, unused page in my bound notebook that said, “What am I ignoring?” If I ever turned to that page or the card fell out, I had a personal rule that I would not leave work that day until I had spent at least 10 minutes pondering that question. You would not believe the number of issues I was able to anticipate or correct out of those random queries.

We all need to step back once in a while to look at our business through different eyes. These times can be invaluable for keeping things on-track or for preventing problems. Take some time today to consider what it is YOU are ignoring that you should not be.

Requested Information–Our Solution Offerings

As a “full-service investor” we offer a wide variety of help. I try not to be overbearing about advertising our solutions, but when I get requests, I try to respond. So, here goes. Here are the things I may be able to offer, depending on the actual circumstances:

  • Residential, non-owner-occupant funding to investors
  • Homeowner with negative equity wishing to sell while avoiding the lender hassle associated with a typical short sale…and to clean up their credit report IMMEDIATELY so they can qualify for a new loan on a new home they can actually afford
  • Commercial distressed or value-add funding $1MM and up
  • Debtor-in-possession (DIP) funding for operations during commercial bankruptcy
  • Commercial refinance
  • Rehabbed properties
  • Wholesale properties
  • Purchase of non-performing notes and pools
  • Purchase of REO pools
  • …and much, much more–we almost always have SOME solution for you. ASK!

If you have a need, we may have your solution! Whether you are looking for distressed properties to buy and renovate or looking for renovated properties for cash flow, whether you are a sponsor looking for funding for your commercial value-add project or a sponsor in distress, we understand your challenge and can generally help or refer you to someone whose wheelhouse accommodates what you need.

Hard Work or Hardly Work?

Did you start your business or start investing in real estate because you saw it as a way to get rich quick? Despite the popular book about a 3-hour work week, successful business requires hard work.

Take real estate investing, for instance. Finding potential properties to purchase is easy. That’s why there are so many other folks competing with you to buy them. Part of the hard work here is beating out your competition while preserving the margin you need to make money.

On the other hand, finding the properties that everyone else is not finding is hard work. Once you find them, however, purchase is easier because you have less–or no–competition. So either way, profit is not going to be handed to you on a silver platter. You are going to have to work for it.

That means success depends on long-term effort, slow and steady, Are you mentally prepared to do whatever it takes to be successful? If you have not achieved the level of success you want, consider whether you are working hard enough and smart enough. Maybe you’ll decide to go work harder and smarter anyway!

Recipe? You Still Want A Recipe? Take this!

Okay. You’ve been following this series of posts for the last few weeks and you are still struggling. Maybe you do not yet have the faith you need in order to realize you hold the keys to your own success. You want someone to lay it out for you. Shall I lay it out for you?

Use the knowledge you have gained to pick a path known to work. How do you know it works? More than one person is doing it successfully. Preferably including someone you know.

Now here is the trick: Accept the fact that you are going to mess it up, do it wrong, and fail! If you are normal, you will mess it up, do it wrong and fail nine times before you succeed. If you are convinced you are not normal, that you are REALLY dumb or inept, pick a bigger number. Are you a 19-failure kind of person? 29-failure? If you have an incredibly low opinion of your readiness, maybe you’re a 99! Thomas Edison had to find 999 ways to NOT make a light bulb before he found the one that was the right way. Colonel Sanders had to find 999 restaurants unwilling to use his recipe before he found one who would. I assume you know their first, single success ultimately made them rich and no one cares about the 999.

Got your number? Good. Now go do it that many times, knowing you are probably going to fail and you just need to get them out of the way. But be careful! Winning 1 time in 10 does not always mean the tenth time is the win. Sometimes the win comes in the middle. You have to treat all 9 or 19 or 29 of them as though this might be the win! Do your best. And if it was NOT the win, no big deal. You’re just out there collecting your failures anyway.

As you do it, watch what is working and what is not. Ask yourself each time, “What did I do that I want to keep doing?” and “What can I do better next time?” Then go do the next one with that wisdom added to what you knew before the prior one. If you do it sincerely doing your best, regardless of how “they” did it, you’ll find your win before you get to your failure number. You’ll discover that you are better at this than you thought. In the process, you will also have taught yourself a thing or two about what works. Now THAT’s cool! You’re creating your own wisdom!

To make this work, you need to be committed to doing it until you get your win, NO MATTER WHAT. Can you commit to that? If you can, you’ll be a winner that others will be looking to for inspiration in the future. If you cannot, well enjoy the grind, because that’s all you’re going to get. Ever. Might as well go do something else. Now, before you waste any more time.

As Mrs. Henry Ford once said, “Whether you think you can or think you can’t, you’re right.”

You can indeed be as successful as you make up your mind to be. Go for it!

Puppet? Or Puppeteer?

Are you the puppet of someone else’s idea of what you should be doing? Or are you the puppeteer making the decisions about what you should be doing? We can take courses, attend webinars, listen to gurus, read books and try to replicate the recipe they are selling. In my experience that does not lead to success. Their recipe worked for them. I’m different. It probably will not work the same for me. Almost, maybe, but perhaps just enough differently that I never get there.

My only hope for success comes when I take all that I have learned from courses, webinars, gurus, and books, and assemble them into my own recipe. I did not say reinvent the wheel or start your recipe from scratch. I need to use all the wisdom that has been shared with me about what works and put those pieces together intentionally, knowing from their training why what I have chosen will work. It’s more about the mindset than what you assemble. Is my mindset that I am trying to copy someone else’s path to success (follower, robot, puppet)? Or is my mindset that I am designing my own path to success, using the best information I can find (leader, entrepreneur, puppeteer)? By designing my own, I move out of the “victim” space where I can blame someone else if I am not successful. I move into the “victor” space where I take charge of my ultimate success. Victors win. Victims do not.

My problem has never been lack of knowledge about what to do to succeed. It has been that I was not sufficiently confident I could pull it off. I believed I needed to know all the details about how they made it work and then do it exactly that way. My faith was in the “recipe.” I did not believe in myself, in my ability to draw on the assembled wisdom of all that learning in the moment I needed it. I doubted that I could make the right move, say the right thing, choose the right path. I wanted templates, examples, more training, samples, case studies, study guides, cheat sheets. Looking back, the list of what I thought I needed was actually endless. No matter what I had, I was convinced I needed more, because I did not yet have it down perfectly. Worse yet, I was afraid to launch out and do something I did not understand perfectly, because I believed I did not yet know enough to do it right. Sure, I tried. I went through the motions, perhaps even believably. The problem was not the motions. It was the mind behind the motions. It was convinced those things I did not yet know held the key to success. All the while, the key to success was to believe I already held the key to success!

So, how about you? How much do you believe in yourself? Are you willing to take that scary leap and do something you’re not sure you can do? Do it and you will amaze yourself. Humans are generally capable of much more than they attempt. It was and is true of me. I suspect you are human, too. Your path to success starts with that next scary step, whenever it shows up in front of you. Be brave! Use all the wisdom you have gathered to take it wisely, but take the step. Your life will never be the same!