Survivorship Bias: From “Monkey Typing Machines” to the Birth of Stock-Market “Stock Gods”

Sina once held a stock-trading competition and invited a bunch of big V influencers. With 100 people participating, losses were so brutal it was almost unbearable to watch. Later, they got smarter and expanded the number of participants to tens of thousands. And now—right on cue—the stock god finally shows up. Guess what the trick behind it is?

This whole thing is especially interesting and worth breaking down. At first, Sina ran a “Masters” contest: inviting well-known expert big Vs from the industry to compete, with only around 100 people. The result was predictably disastrous—some of the more shrewd ones simply stopped paying attention to Sina; they never opened positions, yet they consistently stayed in the top ten. This made Sina look pretty bad.

Later, they finally figured it out: to manufacture a stock god, with so few samples, it simply isn’t possible. It’s like putting 100 monkeys in front of a typewriter and letting them randomly mash keys—they can’t possibly type out a book like the Iliad word for word. What do you do? Expand the sample size. The “Masters” contest turned into an advice-givers contest, and all investment advisors could enter. That pushed the count from 100 to tens of thousands. Now the winners in the top rankings finally had attractive returns. It wasn’t that these people were necessarily so skilled—it was that there were just too many of them, so someone would inevitably hit luck. Even some brokerage branches had dozens of advisors sign up at once; each advisor followed a different style, so there was always one who happened to catch the market. Then Sina started charging fees, asking ordinary investors to subscribe to the trading strategy of these “stock gods” who ranked high.

So what’s the essence of this scheme? In his book “The Foolishness of Random Walk” (The Flawed Wisdom of Fools), Taleb uses a brilliant metaphor: if you put an infinite number of monkeys in front of typewriters and let them randomly bang away, one of them will eventually produce the Iliad narrative poem with perfect accuracy. The probability is unbelievably low, but as long as the sample size is large enough, it will happen.

Here’s the question: if such a monkey-writer really appeared, would you stake your life savings to bet it would write a second book? Of course you wouldn’t. You’d probably estimate that by the time the Earth explodes, the same monkey still couldn’t write anything else. But in the stock market, everyone is doing the same thing every day: seeing that someone’s performance has been great over the past 3 years, they assume he must have some secret, and then they rush to follow. But maybe he’s just the monkey that happened to bang out an epic.

This is the deepest kind of survivorship bias at work. The successful person stands in front of you because he happened to succeed—not because he possesses the method of success that’s why he stands there. In other words, the causality gets flipped. So from this angle, all “success science” can be falsified. You say that reading more, working hard, and self-discipline will lead to success—just find any counterexample that didn’t succeed and you can break it. And there are plenty of counterexamples, even among the students who paid tens of thousands in tuition to take those success courses.

If you buy 20 million lottery tickets every period, you’ll definitely win a $5 million top prize every time. People who don’t understand the situation will see this and think, “What a genius!” If you win every time, there must be a trick. That warps their understanding of luck. We do this all the time: we see the conclusion first, then work backward to invent shortcuts. The easiest way to fall into a trap is to use the wrong correlations to guide future decisions.

The most typical case is learning technical analysis in a bull market. Most people are introduced to the stock market starting in a bull market. They then come across all kinds of technical analysis methods. At the time, it looks so cool, so awesome—and they start thinking: isn’t the stock market basically a cash machine from now on? So they study intensely, build a whole system, and become a stock god in just a few weeks. But this stuff is extremely dependent on bull-market conditions: in a bull market, buying anything makes money, and technical analysis has little to do with it. Once the market turns bearish, the proud system you relied on will fail completely.

There’s a lawyer named Mark. He earns $500k a year, lives on Park Avenue in Manhattan, and has three children. Looking across the whole United States, he beats 99.5% of people: graduated from a top school, a well-known lawyer, high income, property in a core location, and a complete family. No matter how you look at it, he’s a life winner. But in the community where he lives, he’s at the very bottom. His neighbors are either CEOs of big companies, Wall Street traders, or all kinds of entrepreneurs—everyone else has mansions and luxury cars. Mark’s family lives in the smallest house in the entire community and drives the most ordinary car. His wife is frequently mocked: “Why is your family so poor?” That makes their relationship tense. This is exactly what “no comparison, no harm” means. People worse than Mark were excluded from this “sample,” so Mark paradoxically becomes the worst.

So what do you do? Does Ah Q comfort himself and tell himself he’s okay? Taleb says that’s self-deception—you can endure it for a while, but not for life. The best approach is to move out of that top-tier community and live somewhere normal. If you move into a blue-collar area, you might even experience the reverse distortion—feeling like you’re doing extremely well.

Let me add one more thing here: many parents work themselves to the bone trying to get their children into key schools. In practice, that’s Mark’s situation. Your child may have been doing quite well, but once placed among an elite crowd, the failed cases get filtered out—so your child ends up looking like the worst, the least confident. Competitors of roughly similar level can ignite ambition, but when the gap is too large, all that’s left is despair. Human nature is hard to make fully rational. So don’t always think self-control can solve everything. A smarter move is to change the environment, not just yourself.

Taleb also criticized some bestselling personal finance books. For example, one book tells you that saving plus investing will make you a millionaire—but that statistic has serious bias. The “samples” it used are all people who were already rich. It’s like only seeing the single monkey that typed out the epic in front of the typewriter. Yes, winners do tend to have the characteristics of saving plus investing—but the reverse isn’t necessarily true. Saving plus investing doesn’t necessarily make you a winner. And many people accumulate savings only to have inflation eat them up. More people end up losing everything because they invest wildly. Plus, investors have a strange habit: when they should buy stocks—when the expected value is high—they lose interest in the market; when they shouldn’t buy—when the expected value has even turned negative—they suddenly become very interested and rush in. Isn’t that infuriating?

Next, consider the fund industry—where survivorship bias is even more absurd. Look at fund rankings, and you’ll find many funds whose historical returns far exceed the benchmark, making it seem like the industry is full of experts. But the truth is: a large number of funds with terrible performance have already been quietly liquidated and disappeared from the rankings. The data you see is a selection result where several of the lowest-scoring funds were removed, while keeping only the highest-scoring ones—the effect is highly misleading. And the playbook used by fund companies is exactly the same as Sina’s stock-trading contest. Every fund company places bets across different sectors, launches dozens or even over 100 products, covering every style—so there’s always a sector that happens to catch a favorable stretch of the market. The corresponding fund rises and becomes the star. Then the fund company quickly packages and promotes it, launching new products and using the performance of that “star fund” to extract even more management fees. This trick keeps working because it’s not really a question of whether fund managers are so much more capable—it’s just survivorship bias. Those fund managers with poor performance are either sidelined or simply leave, so you never see them at all.

There’s another point worth mentioning: what has no randomness? Professional skills. A chef cooking food is better than what you can make, a doctor treating you can cure you, and the probability of success is very high. This kind of craft can be relied on as a long-term way to make money. But investing is far less deterministic than cooking or medicine. Even with enough samples, you can’t consistently cook a dish that’s better than a chef. However, you might beat a fund manager in a certain period—not because you’re stronger, but because you happened to sync with the right timing. That’s why you should always pay attention to randomness when reading personal finance books.

Even if it’s Warren Buffett—if he hadn’t been born in the United States and caught the United States’ greatest expansion over the past 100 years, could he still have become a stock god? The top fund manager Peter Lynch only worked for 13 years before retiring. When he took over, it just happened to be the end of a long period of decline in the US stock market, and his career coincided with the best stretch of upside. After he retired, the US still had a bull market, so everyone thinks whatever he says is correct. But if you search Lynch’s books, you’ll find very little content about risk control—because throughout his entire career, he almost never encountered truly major risks. Under Taleb’s theory, the success of these masters also includes a component of randomness that can’t be ignored.

Have you ever bought a “celebrity” fund, or followed a big V’s strategy, and later realized something was off? Share your experience in the comments and see who is the monkey selected by fate.