How to Read Numbers

Imagine you’re on a beach one afternoon. The waves come in and out; sometimes they reach higher up the beach, sometimes lower. You’ve built a sandcastle, and you’re waiting for it to be destroyed by the tide. (This is a good thing to do with young children, to teach them about the remorselessness of time and the futility of all human endeavour.)

Survivorship bias is an example of a wider problem called selecting on the dependent variable. That sounds complex, but it’s a simple idea: you can’t work out why X happens if you only look at examples where X did happen.

There’s an old saying in economics, Goodhart’s law, named for Charles Goodhart, a former economic adviser to the Bank of England: ‘When a measure becomes a target, it ceases to be a good measure.’