Survivorship Bias in Real Estate Agent Training

How To Overcome Survivorship Bias in Real Estate Sales

Survivorship Bias in Real Estate Agent Training

As a new real estate agent, you want to be successful, you crave that feeling of putting up multiple listings signs every week and a pay cheque waiting for you at the end of every week. As a new REALTOR or growing real estate agent, you listen to the pros at your office, in your market, and in books, podcasts, and blogs throughout the world. You intently listen to their stories thinking that if you do what they did, you will have their success. It’s natural to think that if you if follow their “one trick to ultimate success,” you will be the next in line for this success.

If you do this without further rational thought, you are opening yourself up to the Survivorship Bias.

In real estate, psychology is one of the most important fields in our jobs. Psychology explains human motivation to buy and how to work with sellers in highly emotional states. It also teaches us how to analyze ourselves and our own behaviors to make better decisions in business and life.

However, as real estate agents, rarely do we take a look at this important science. We chase the next new product or lead generation strategy and pull our hair our wondering why our buyers won’t pull the trigger and why our seller’s won’t reduce their price is a downward market.

As new real estate agents and growing REALTORs, you need to become familiar with psychology and, know some of the tricks the mind plays on us.

Survivorship Bias

The survivorship bias is a trap that almost everyone in real estate will be victim to at some point. It is our tendency to focus on the winners or the successful people in a space and completely neglect the failures.

A prime example of survivorship bias in entrepreneurship is “Bill Gates, Richard Branson, Mark Zuckerberg, and Steve Jobs all dropped out of college and created multi-billion dollar businesses.” Or “Steve Jobs credits his success to wearing only black to avoid decision fatigue.” Of if you have read a post like “11 Things Successful People Do Everyday.”

These are all examples of survivorship bias because you are only focusing on the winners.

What about the thousands of people who dropped out of college and have not created successful businesses? In fact, 94% of the most successful people in business in the US have a degree. Why then do we focus on only the tiny percentage of those that succeeded despite the statistics?

It is due to survivorship bias and our tendency to overvalue the tricks and tips that worked for the highly successful but forget about those that those same tricks and tips did not work for.

It is due to survivorship bias and our tendency to overvalue the tricks and tips that worked for the highly successful but forget about those that those same tricks and tips did not work for.

This is the survivorship bias in action.

Survivorship Bias with Real Estate Stars

Now don’t get me wrong, listening to the greats in your industry and learning from them is important. There is a lot of good that comes from following in the footsteps of those who came before you. But don’t boil one’s success down to their “one tip.”

Understand that top producers in your market likely did build their business based on a small number of prospecting activities but there is more to it. One agent in my market says she became successful because at the start of her career, “she belonged to 5 gyms and met many people at the gym.”

That is great, but just because you join 5 gyms, doesn’t mean you will be a top producer. What else did she do? Did she learn how to have a great conversation? Did she gain skills asking people for business? Did she study the market like crazy so when someone asked about the market at the gym, she could answer with confidence? Did she get one listing from the gym manager who also happened to talk everyone that walks through the door?

You can see where I am going with this. If you just focus on the winners and their tips and tricks, you may have a better chance at success but you still need to go one step further to avoid getting trapped in the survivorship bias.

Listening to Praise

Have you ever when to look up a Google Review or Yelp Review for a restaurant and found that the reviews were completely divided? Ten 5-star reviews and Two 1-star reviews. All feedback is important, but are these reviews that helpful to the restaurant? Probably not, because they are just reports from those that love the restaurant and hate the restaurant, so it is subject to survivorship bias.

As a new real estate agent, you might hear from your clients that you are providing the best service and that they love your work. Praise is important and it does help build our confidence, but this won’t necessarily help us improve.

I’m not suggesting your ask your customers not to provide you with positive reviews; of course they help your business, but when you are looking for ways to improve, it’s just as important to ask for their constructive feedback.

Alternatively, if you have an expired listing and the seller lets you know they are listing with someone else, and you ask them why, they may say, “this agent has sold X number of properties in the area.” Where you dropped the ball was during the listing agreement, not at the end when they are interviewing other agents. If you turn around and tell yourself you lost the listing because another agent with more sales swooped in, you are discounting the potential reasons you lost the re-list.

Whether you are looking at positive or negative feedback, don’t just focus on the datum in the outlying areas.

Lead Generation and Survivorship Bias

Everyone knows that company. The one that promises you hundreds of qualified leads. They say these leads are near the buying window and all you need to do is convert them. They provide examples of agents who sold 20 homes last year just from their service.

If you have been pulled into this then again you are being pulled into the same survivorship bias trap that you would be if you decided to only wear black like Steve Jobs and tell yourself that this, alone, will make you successful. 

Maybe the lead generation company says, “the top agent using our service sold 132 homes last year.” This is also a common recruiting trick in real estate. The broker may say, “we have the top agent in the market at our office”. Or, “our 5 highest producers all make over $750,000 per year.”

Those are all great things but that artificially highlights the winners and winning statics and completely disregards that failures.

That’s not to say you don’t want the service or want to be at the office with the market’s highest producer but just understand that more goes into success and these companies may be selling you. It’s not just the service or just the office that lead to these people’s success.

Focusing on Just the Sale

Focusing on just your sales numbers as a real estate agent can also be a form of survivorship bias. If your last month was very productive, you might ask yourself what you did differently last month to cause those sales.

In real estate, you typically reap the rewards of your work at least 90 days after the effort was put in. Perhaps you started making more phone calls 3 months ago then quit and joined a networking group last month. You may think that you joining the networking group was the cause of your sale when in fact it was your increase in calls.

One of the most important skills in real estate is to focus on the activities that move the needle to your success.

If you focus on exactly what you were doing at the time you were signing the listing or purchase contract, you will be putting too much emphasis on certain things that may not be leading to success.

Luck and Success

After learning about survivorship bias, you may begin to think that it sounds like success just comes down to luck. If I don’t need to follow what the top producer says to do to become successful, then do it just need to get lucky?

The thing about luck is we think that this relates to just random chance. That maybe we get successful in real estate and maybe we don’t. Using a word like luck can take all the wind out of your sails as it seems like luck is just rolling a dice.

That could not be further from the truth. You do need some level of luck to be successful but it’s not the luck you think.

You need to continuously be putting yourself in situations to become lucky. If you follow the top producer in my city that credits her success to joining 5 gyms and all you do is join 5 gyms but don’t work on your sales skills, market knowledge, and conversations skills, you will need a ton of random luck to see any success.

However, if you join 5 gyms but also work hard on your conversation skills and build your network through the gym, your chances of getting “lucky” go up dramatically.

So it is not about thinking of luck as complete random chance. It’s about setting yourself up to capitalize when positive situations present themselves as they definitely will if you continue focus on successful activities and not just being pulled into the survivorship bias.

Conclusion

Survivorship bias can easily creep in to our thinking as real estate agents and entrepreneurs. If we focus only on the skills and habits of those that are successful, we forget about those that did the same things but were not successful.

As new real estate agents, we need to look at the whole picture and not get pulled into companies that say they can double our business or following the next buzz-word heavily headline like “11 Things Successful People Do Everyday.”

We need to look at the whole picture of success and work on skills that we know we need even if they aren’t listed in the last buzz-word article.

Finally, we need to put ourselves in the position to be lucky and not “random chance” luck but improving our probably of success through positive daily action.  

Quote by David McRaney

Luck is actually a pattern of behaviors that coincide with a style of understanding and interacting with the events and people you encounter throughout life. Unlucky people are narrowly focused, he observed. They crave security and tend to be more anxious, and instead of wading into the sea of random chance open to what may come, they remain fixated on controlling the situation, on seeking a specific goal. As a result, they miss out on the thousands of opportunities that may float by. Lucky people tend to constantly change routines and seek out new experiences. Wiseman saw that the people who considered themselves lucky, and who then did actually demonstrate luck was on their side over the course of a decade, tended to place themselves into situations where anything could happen more often and thus exposed themselves to more random chance than did unlucky people. The lucky try more things, and fail more often, but when they fail they shrug it off and try something else. Occasionally, things work out.

Podcast Transcript

[00:00:00] Hello and welcome to Rev Real Estate School. The podcast with quick tips and actionable advice to help you sell more real estate in today's world. And now your host Michael Montgomery.

[00:00:11] Hello and welcome back to another episode of Rev Real Estate School. I'm your host Michael Montgomery. Today we are talking about psychology and we are talking about one specific bias that we have that a lot of people have when we are in the real estate industry and how we can avoid having this bias impact the way that we do business.

[00:00:32] As a new real estate agent you want to become successful or has a growing real estate agent you want to become successful you crave the feeling of putting up multiple listing signs every week and having that paycheck waiting for you at the end of every week. Sometimes what we'll do is we'll look at what the professionals were doing either in our office in our market and we'll try to emulate it. For instance somebody might say this is the reason why I have been successful X is the reason why I have been successful. And then we think all we really need to do is that one thing and we will also have the success that they have. This is what's called the survivorship bias and it works like this. We tend to overvalue the tips and tricks that have worked well for other highly successful people but we forget or neglect to look at that there's a number of people that use those exact same tricks and tips that did not become successful.

[00:01:30] Let's take an example Bill Gates Richard Branson Mark Zuckerberg Steve Jobs why do they all have in common they dropped out of college and created these multi-billion dollar businesses. So by following that logic if we just thought that what made them successful was dropping out of college then theoretically if you drop out of college you will be as successful as they are. We know this isn't the case logically but this is what happens. And we also see this in kind of buzz worthy posts that you see out there: "eleven things successful people do every day that you need to start doing." There is nothing necessarily wrong with a post like this. It's motivating. It's inspiring. But we do need to look at the fact that this is subject to the survivorship bias. We're looking at what successful people have done and then we're drawing conclusions that if we do those things we will also be successful.

[00:02:27] That's not to say that if somebody says in real estate you need to doorknock every day in order to be successful. That's great. But what do we need to do what do we need to say. What else led to their success outside of just being there knocking on the door. So that's where we have to start looking at survivorship bias. And if somebody has to say that this is what will make you successful in real estate we need to look at that one step further and look at it more on a whole scale. And if you heard the episode yesterday we were talking about basically the one thing that will make you successful in real estate. So it seems somewhat contradictory but the one thing is consistency and through consistency you will learn the skills you will craft your skills and you'll become better at what it is that you are doing. So if you consistently do the wrong things or have poor performance in what you do then no you will not be successful however chances are if you are sticking with something and you are building the habit of consistency then you will start to do quite well at what it is that you are doing.

[00:03:31] Let's look at example at a survivorship bias and how we can avoid this in our career. I have an agent that I am close friends with in my market that has made a ton of money off of the cycling community. He is a cyclist. And what he does is he meets a ton of people through cycling. He credits his success to cycling. If you asked him and you said, "Hey what made you successful," he would simply say "cycling" but let's look at this one step further. If you just look at the cycling is that truly what made him successful. What made him successful were the great conversations he was having the skills he was gaining. Did he study the market like crazy so that whenever somebody asked him out on a ride how's the market. He could answer that with confidence, probably. So there's more to the story than just the one thing that the person does. The reason why this is so important in real estate is because when we hear these stories of people that have became very successful by seemingly doing one thing or by looking at these people that have built these multi-billion dollar businesses that have dropped out of school the fact of the matter is 94 percent of people that are extremely successful and business do have a college degree. That's not to say you need a college degree to be successful. But if all you're looking at is dropping out of school equals successful career that's not necessarily the case because all you're doing is you're looking at the winners you're not looking at all of the thousands of people that did not succeed.

[00:05:04] In real estate when you are learning from somebody else and they're telling you all you have to do is this one thing that's great. But what else is required? Are you going to be successful in real estate if all you do is open houses? And that's what your mentor did in order to become successful. Well you have a higher chance of being successful than if you don't do anything. But if you don't hone your skills and craft your abilities to have conversations with people at open houses to convert people at open houses to turn those into buyer presentations or listing presentations then your chances of being successful just you doing open houses will be diminished. What we're doing here is we need to look at it as a whole. So you do not want to get trapped in this survivorship bias and just looking at what successful people have done and what tricks and tips have worked for them and saying that that is 100 percent the way to do it. We need to take a step back. We need to look at it as a whole picture so that we're not trapped in this survivorship bias.

[00:06:05] Of course this doesn't mean stop doing things that successful people have done in the past. It just means we need to look at this as a whole and we need to understand that just by doing certain actions and not necessarily learning and growing and working on our skills that doesn't necessarily mean that we're going to get the exact same result that somebody else did. The other thing about this is if we do do different things outside of what the successful people have done. But we are still building our skills and we are still gaining business in other ways that we can still be successful. Basically what this means is there are a lot of different ways in order to become successful in real estate. You can definitely have your mentors or your idols or the people that you really want to emulate within your market or in the industry but also keep in mind that it's not just a one size fits all. And one quick thing like cycling or open houses will lead to success overnight. You need to become an amazing real estate agent. Make sure you go to the show notes for this episode. There's a lot more information on a survivorship bias than how it impacts us in real estate how it impacts us as far as just focusing on sales. There's a couple more examples. And then also it talks a lot about luck and how that plays into things so definitely go to the show notes is a very interesting breakdown on how this all works and how survivorship bias works in real estate.

[00:07:31] Thanks again for listening to this episode. Remember you can ask a top producer anything. All you have to do is head over to our website go to the free coaching section and you just write and review the podcast basically and then you can ask your top producer or anything that you would like.

[00:07:45] Thank you very much for tuning into this episode and we'll see you in the next lesson this episode of Rev Real Estate School has come to a close. Thank you for tuning in. We'll see you back here for the next lesson.

Sources

David McRaney: Survivorship Bias

Meg Prater: Survivorship Bias (HubSpot)