Investing and survivor bias

Money, time, investing and survivor bias.   What time travel could teach us.

‘Oh’ we might say to ourselves, ‘if only we could travel back in time and buy Apple and Amazon, Microsoft and Google, Facebook and so on.”  

But, for every Apple and Amazon there are a hundred names that none of us have ever heard, or could ever remember. The companies who didn’t make it and who have been consigned to the dump of history.  

This is known as “survivor bias.”  You remember the survivors but not those doomed to Darwinian death. This can give us a false sense of the promise offered by stock market investing, let alone early-stage investment, venture capital or angel finance.  

Back in time, antiquity all around

If we are going to do any of the above, and I personally do all of them, it would be as well that we disentomb these failures and recite their names in the same wistful breath as we intone those oh so conspicuous survivors who could have made our fortunes a million, a billion, or even a trillion times over. And let’s not even start on Bitcoin.

The moral of the story? Picking winners is supremely difficult unless you have a time machine, unless it is your full time job and even then it remains supremely difficult.

In the absence of a time machine or professional career as an investor, the best you can do is to pick a diversified fund. The old do not put all your eggs in one basket adage. Most of my Investment Portfolio is in such diversified funds. Individual stocks, venture capital and angel finance make up a small percentage of my portfolio.  

You can read more investment strategy in my book, 10 Things Everyone Needs to Know About Money.

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