CB-005 - Lucky or good - Why not both?

Cavemen, gambling, and gurus. What could go wrong?

Author

Zack Monninger
May 14, 2023

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The cemetary of failed ideas is vast, yet we often only see the monuments of success.

Daniel Kahneman

Hot Take: Some of your favorite success stories are little more than luck.

Hello, CubeBreakers!

This is my 5th newsletter. No one has been mean so that’s cool.

Why You’re Here: To escape the 9-5 and build your own thing.
Why I’m here: To short-circuit that journey.
What’s New: This week’s edition hits 80+ mailboxes!

I want to make this better: Tell me about your pain points. Why are you reading this newsletter instead of already running your solo business? Hit reply and tell me. I can’t help if I don’t know.

Today’s Topic: Survivorship Bias

Why You Should Care:

Humans crave patterns. We need stories. If there is no explanation, we make one up! 

“Hey Cave-Dad - how’s that giant glowy thing in the sky work?”

“Great question Cave-Kid. That’s the Sun God. He drives his flaming chariot in the heavens every day just so we can see!”

“Ahh that makes total sense! Thanks Cave-Dad! You know everything!"

This makes us all susceptible to overvaluing stories and undervaluing the stuff that helps.

But great information comes packaged as stories also. So how do we sort snake oil from gold?

Step 1 is simply recognizing this bias exists.

How to Run a Betting Scam

Ever seen an ad pop up guaranteeing some guru’s betting picks? Here’s how the scam works.

Week 1: Give 10,000 people your “pick of the week” for free.

→ Tell 5,000 of them that Team A will cover the spread.

→ Tell the other 5,000 that Team B will cover the spread.

Week 2: Follow up the winning group and give them another free pick

→ Tell 2,500 that team A will cover.

→ Tell 2,500 that team B will cover.

Rinse and repeat.

By week 10, you’ve got ~10 people left who have witnessed your glorious Nostradamus-esque foresight, picking 10 straight winners.

That’s a 0.1% - or a 1-in-1,000 outcome.

They are convinced you’re a genius.

If we played this out for all 10,000 participants, the bulk would be clustered around 5-5.

We’d have as many 1-9 records as 9-1. In statistics, this is called a normal distribution.

So with ZERO useful insights at all, our betting guru has delivered REAL results to some portion of that 10,000.

And not just the ~10 that got perfect results. There’s a decent chunk that went 7-3 or better and think “hmm this guy must know what he’s doing.”

Pretty easy to snag testimonials and social proof from that small group right?

Thanks Zack but I’m not here to become a scammer

That’s good. I guess. But I’m here to help you make good decisions and take calculated risks.

You cannot do those two things if you can’t filter for survivorship bias in the information you consume.

The age-old example of survivorship bias is your 80-year-old grandpa saying something like:

“I never wore a seatbelt and I’m fine!”

or

“I smoked 2 packs a day for my entire life and I didn’t die of lung cancer!”

It doesn’t take a Ph.D. in statistics to see through those arguments.

But it’s not always so clear.

The Guru Trap

So what happens when our favorite guru says “This is the system to make you money!”

He’s done it.

And there’s 100’s of testimonials from all the folks he’s helped do the same thing. Proof right?

Maybe.

Or maybe he’s like the betting scammer.

There’s no secret sauce. There’s just randomness where he promotes the survivors as proof.

Those testimonials encourage you to buy. Through randomness, some find extraordinary success.

When you fail you think - “Man - why do I suck? All those other people did it. Why couldn’t I?”

You don’t blame the guru because you bought the story he told you.

And the cycle continues.

Let’s get on the right side of survivorship bias

We don’t want to dabble in games of chance. We only want to play where we have an edge.

That’s the CubeBreakers ethos.

And when we have an edge, we don’t stop until we win.

See - that’s the OTHER side of survivorship bias.

There’s one guaranteed way to fail - and that’s to stop showing up.

Even in our gambling guru example of pure randomness, you can’t get lucky if you don’t show up.

The truth is that business is not a game of random chance. There are edges available that increase your odds of success.

Grab those advantages and keep showing up.

We don’t rely on chance - but we RECOGNIZE its role in our success. Play two lottery tickets and you double your odds of winning.

If everyone does things the RIGHT way - some will still fail. Some will stumble into lucky breaks and find crazy success.

Most will build durable, sustainable, solo businesses. That’s us.

Until next time - LFG.

-Zack