You get an anonymous letter on January 2 informing you that the market will go up during the month. It proves to be true, but you diregard it owing to the well-known January effect (stocks have gone up historically during January). Then you receive another one on February 1 telling you that the market will go down. Again, it proves to be true. Then you get another letter on March 1 - same story. By July you are intrigued by the prescience of the anonymous person and you are asked to invest in a special offshore fund. You pour all your savings into it. Two months later you money is gone. You go spill your tears on your neighbor’s shoulder and he tells you that he remembers that he received two such mysterious letters. But the mailings stopped at the second letter. He recalls that the first one was correct in its prediction, the other incorrect.
What happened? The trick is as follows. The con operators pulls 10,000 names out of the phone book. He mails a bullish letter to one half of the sample and a bearish one to the other half. The following month he selects the names of the persons to whom he mailed the letter whose predication turned out to the right, that is, 5,000 names. The next month he does the same with the remaining 2,500 names, until the list narrows down to 500 people. Of these there will be 200 victims. An investment of a few thousand dollars' worth of postage stamps will turn into several million.
This gets at the heart of survivorship bias. When presented with something that seems truly remarkable, ask yourself what part of this story is being left out or hidden?