Don't trust successful people's advice
Have you seen these type of articles before? Things like, "12 Things Successful People Do Differently". Or, "13 Tips From The World's Most Successful People" The logic is: if it helped them get success, it should at least be somewhat helpful to you, right? Yet, this type of logic is fundamentally flawed And could very well make you worse off. To show just how easy it is to get fooled by these success stories Imagine this simple scam: First, get the email address of 50.000 people Next, tell them you're part of a hedge fund that can accurately predict the stock market. Now, here is the trick: To half of them, say that the stock markets will go up and make up some reasonable explanation as for why. To the other half, say the stock markets will go down Now, by the end of the week the stocks will move either up or down. Let's say the stocks moved up. All you need to do is call the half which received the wrong prediction So, out of the remaining 25.000, once again tell half that the stocks will rise and the other half that it will fall. At the end of the week, call the half with the wrong prediction and repeat. Ultimately, by the end of week 10 you would have shown around 50 people that you can accurately predict the stock markets 10 weeks in a row. Sounds pretty impressive, right? In fact, if they'd then entrusted 10.000 dollars to your hedge fund you would've run away with half a million dollars Now, you might be thinking "Surely this doesn't happen in real life!" Well, it does. But we are those 50 remaining people Because we are so in awe of these successful people We don't even consider that there might be some other huge factors at play, such as: luck! For example, let's say you wanted financial advice. One hyper common advice, given on how to get rich is to take risks. Because even if you fail, you can still learn from your failures. That makes sense, right? However, consider all the people who are bankrupt. No doubt, they took risks too. So, where's their success? Clearly, if we only listen to the winner's story, there's no balancing force of bankrupt people telling us to be more careful Another example: take a look at "In search of excelence" a book which sold over 3 million copies! It analyses about 50 excelent companies and identifies 8 common traits that propelled them to success Yet, since then, out of the 35 companies which are publicly traded 20 are falling below the market average. 5 even went bankrupt. Which bakes the question: were these companies actually 'excellent'? Or perhaps: were some of these 50 companies just the lucky ones out of a pool of 50.000? and if so, why should anyone listen to their advice? From here you can see what the problem is: If you only take advice of the so called successful people and ignore all the failures, you're going to be left with a heavily distorted view of reality This is known as 'survivorship bias' Furthermore, it doesn't just apply to financial advice. Let's say you wanted some relationship advice. Naturally, you'll search for some happily married couple of 40 years and ask: 'What's your secret to marriage?' They'll give sensible advice too, like: 'focus on your partners' positives rather than the negatives Now, sure, this sounds like good advice. It might even work! Yet, it's only when you factor in both the happily married and the bitterly divorced that you get a better picture of what's really going on. Take a look at this graph. If follows the lives of about 2.500 German participants for 10 years. As you can see, those who are happily married are just happier to begin with even before they met their husbands and wives. They were already leading happier lives. On the other hand, those who ended up divorcing were naturally more depressed. Now, this isn't something people realize. Not many would say: 'I'm happy with my marriage because I'm just happier about stuff in general' And yet, this seems like such an important factor. It suggests we should focus on improving ourselves before we think of improving our relationships. So, here's the bottom line: When it comes to complex things in our life, like marriage and getting rich No one really knows what it takes to become successful. Therefore, when listening to the advice of successful people be skeptical and make sure you aren't getting fooled. Instead, consider the failures and perhaps you'll learn more.
