SAT Math · Evaluating statistical claims: observational studies and experiments · hard
A researcher studying successful startup companies that are still operating after 10 years finds that a high percentage of them had…
A researcher studying successful startup companies that are still operating after 10 years finds that a high percentage of them had aggressive early spending strategies, and concludes that aggressive early spending helps startups succeed. Which limitation most directly undermines this conclusion?
Answer and explanation
Answer: C: The study only examined startups that survived, excluding startups with aggressive spending that failed and closed before the 10-year mark.
This is survivorship bias. The researcher looked only at startups that were still operating after 10 years, so any startups that spent aggressively and then failed are missing from the data. Without them, we cannot tell whether aggressive spending helps or simply appears frequently among survivors, perhaps equally common among the failed ones. That is choice C. Choice A is not a problem, because a causal effect does not have to work for every company. Choice B questions the time frame but does not undermine the logic. Choice D is about cost, which is irrelevant to whether the strategy leads to success.
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