Jason, this was a great piece and more should do themselves a service by reading it.
It's one reason to pursue 'smaller' opportunities with lower variance of return expectations but higher median returns -- for example many niche businesses -- than industries with gigantic return expectations. The latter attracts far more entrants, and while somebody gets rich, the median player does not. But this isn't clear to new entrants because of survivorship bias.
Somewhat related to this is the data availability bias. Big opportunities tend to have much better data sets, and so are easier to study and receive more attention. Many niche industries are closely private and are smaller, so do not have much publicly available data, making study difficult and attracting less attention. Therefore like moths to light bigger industries receive more study and more entrants even though their median expected economics are worse.
It's one reason to pursue 'smaller' opportunities with lower variance of return expectations but higher median returns -- for example many niche businesses -- than industries with gigantic return expectations.
This neatly encapsulates much of my current business strategy.
Warren Buffett talks about this in stock investing: you're more likely to find a bargain in the under-researched companies, because there's greater variance between the stock price and the stock value (price inefficiencies).
He's publicly claimed to be able to double a million dollars in a year with this approach (it won't work for his $40+ billion, because there aren't enough under-researched stocks to buy that are also bargains).
It's one reason to pursue 'smaller' opportunities with lower variance of return expectations but higher median returns -- for example many niche businesses -- than industries with gigantic return expectations. The latter attracts far more entrants, and while somebody gets rich, the median player does not. But this isn't clear to new entrants because of survivorship bias.
Somewhat related to this is the data availability bias. Big opportunities tend to have much better data sets, and so are easier to study and receive more attention. Many niche industries are closely private and are smaller, so do not have much publicly available data, making study difficult and attracting less attention. Therefore like moths to light bigger industries receive more study and more entrants even though their median expected economics are worse.