Survivorship bias is often discussed in financial and medical circles, with theoretical, quantitative, and philosophical debates around its very existence (see https://www.scientificamerican.com/article/how-the-survivor-bias-distorts-reality/ and https://www.sciencedirect.com/science/article/abs/pii/S1047279713000896 and https://en.wikipedia.org/wiki/Survivorship_bias for just a few examples). Is it just a statistical artifact that surfaces in any long-enough run of instances? Another manifestation of the “hot hand”? An indication of some force of character or nature that reflects strong will, determination, and preparation of the few left standing?
There is a recent article in Institutional Investor that describes the recent run by Boaz Weinstein at Saba Capital Management (https://www.institutionalinvestor.com/article/b1m3lx01dnj9mq/Boaz-Weinstein-Is-Making-Bank-He-s-Not-Happy-That-You-Know-About-It –hat tip to The Profile https://theprofile.substack.com/ , which is a great newsletter to learn about interesting news makers and characters). The article discusses Weinstein’s insights, strategies, and reluctance to open up about more details. It’s an interesting read that also highlights a classic example of either survivorship bias or well-earned opportunity emanating from preparation and skill.
There are two passages that indirectly gets at this.
Survivors
“Every market crisis vanquishes a swarm of speculators. But it also lifts a chosen cadre to exalted status based on their ability to sidestep doom and wring lucre from others’ misfortune.
Jesse Livermore made millions amid the wreckage of the 1929 crash. Jim Chanos cashed in as Enron Corp. unraveled during the dot-com collapse of the early 2000s. And John Paulson sifted through mountains of housing data before wagering on the subprime crisis, making billions for his investors and himself.”
Just reading names, numbers, and dates reduces this to some random traders who are probably clones and made it big with the right wind at their sails.
Is this really all to the story?
Individual differences
Contrast this paragraph:
“The varied trajectories of those who scored fortunes amid past bear-market turmoil offer little guidance. Paulson, for example, failed to repeat anything close to his great subprime gains, making an ill-timed wager on gold. But Kynikos Associates’ Chanos, who testified before the U.S. Senate about market reforms, continues to successfully target frauds, fads, and bubbles. Livermore, of course, committed suicide in 1940 in the cloakroom of the Sherry-Netherland Hotel on Fifth Avenue.”
Three individuals, three tempers, three personalities, three sets of skills in adaptation, and three very different outcomes. These examples hint at the notion of individual differences (https://www.sciencedirect.com/topics/social-sciences/individual-differences) which is all too often overlooked in behavioral research and explanations. It seems obvious—but most science, research, mathematical/econometric models are built on the opposite—no variability in the agents where one can easily be replaced as another.
Is this then end of the story?
Opportunities meet prepared minds at the right time
Probably not. As with most things, survivorship bias is likely the right circumstances or opportunities intersecting with the right minds at the right times.
