Survivorship bias in the domain business

Be careful that you don’t fall for survivorship bias.

Survivorship bias image of woman selecting one of ten people

A few years ago, it was popular for business publications to run headlines like “This billionaire’s secret to success: only sleep 5 hours a night” or “Richest people only eat this diet” and other nonsense.

The idea is that you, too, can become a billionaire if you just sleep 5 hours a night and eat blueberries every morning.

It’s an example of survivorship bias: only looking at the people who have made it past a selection process and assuming that what they did is the way to succeed.

There are plenty of wealthy people who sleep 8 hours a night and don’t do keto.

You see this in business if you just focus on the winners. For every Facebook and Google out there, there are 100s of companies that followed a similar path and failed.

The same can be said for domain investing. It’s easy to get swept up into trying to model off of successful domain investors. But it’s important to think about why that path was successful and if it can be successful for you. It’s just as important (if not more important) to talk to people who haven’t been successful and understand why.

An example is when people ask if you should own a large portfolio of mediocre domains or a small portfolio of great domains. I can point to domain investors in each of these camps who are successful. There are also lots of people who fail at each of these approaches. So if Jim invests in only five great domains and is now a millionaire, this isn’t necessarily the path you should take. Jim might have gotten lucky early with one of his domains.

Another example is negotiation. Should you turn down every offer until someone offers you a million dollars? There are some investors who hit it big this way and many more who lost a sizeable sale because of it. You rarely heard about the latter.

I’m not saying you shouldn’t try to learn from other domain investors. On the contrary, this is very important. But you should try to understand why that investor is successful and what tactics/practices of theirs you should model. Ask yourself if those tactics worked for everyone or just some people, and dig into why.

 

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