Survivor Bias: Why "Big Food" Isn't Quite As Evil As You Think It Is

Lots of food writers and bloggers, myself included, love to criticize Big Food. It's such an easy target. After all, shouldn't everyone be against an industry that earns billions by force-feeding us unhealthy foods?

Of course, you can only make a statement like that (and keep a straight face) if you view the world with a conspiracy-theory mentality. If that's your primary mindset, stop reading this post right now. Because I am about to suggest an alternate explanation for the realities of the food industry--one that doesn't involve the a priori assumption that our destiny is under the control of an evil cabal of greedy food lords.

A warning though: this explanation involves a quick detour to statistics class, and a quicker detour through my former career on Wall Street. But in just a short few minutes, you'll see that someone else is behind the curtain selecting the foods on our grocery store shelves.

My quick detour starts with a financial question: what happens to a mutual fund that really sucks? (Don't worry, this will be brief. I promise.)

Well, a mutual fund can get away with suckola performance for a few years, but if it significantly underperforms its peer group for much longer, it will be closed down and killed off. It gets pulled from the newspapers, its performance record vanishes, and it gets washed down the memory hole as if it never existed.

Here's the point: this regular mercy-killing of bad mutual funds creates a deeply misleading picture of past performance. Since the worst-performing funds are regularly removed from the data set, the past performance of mutual funds in general looks better than it actually was. What you see isn't really a true picture of past performance--it's just the past performance of the survivors.

Statisticians call this phenomenon survivor bias, and it gives a whole new meaning to the expression "past performance does not guarantee future returns." (Even though I left Wall Street more than a year ago, I still throw up in my mouth a little bit whenever I hear that awful, awful phrase.)

Okay. The point of this article isn't to tell you to be suspicious of the mutual fund industry, that's just a freebie side benefit you get from reading a food blog written by a retired Wall Street analyst. The point is to apply this concept of survivor bias to the food industry, and specifically to the foods sitting on our grocery store shelves.

Many of us like to think that all the deliciously unhealthy foods in our grocery stores are there because evil food companies engineer them that way on purpose. What we don't see, and what few of us think about, are all the foods that weren't quite popular enough with consumers, and were therefore killed off. The food industry is littered with the corpses of thousands, perhaps tens of thousands, of foods that have come and gone. Just like underperforming mutual funds, these unpopular or ill-conceived food products die off because they didn't perform well.

If you were to look over the thousands of foods that came and went over the past 50-75 years, you'd find foods of all types. Some would be healthy, some extremely unhealthy. Some would be terrible and tasteless, some would be delicious but for whatever reason unpopular. Some of these foods never made it past regional test markets or focus group testing. Some had huge ad budgets behind them, while some quietly came and went with no ad spending at all.

In every case, however, what really mattered was this: consumer demand was insufficient to support the products that didn't survive. And so they died. The remaining foods on our grocery stores shelves, however unhealthy they may be, are the product of survivor bias. It's quite simple: the foods most heavily demanded by consumers always survive.

So, who's really behind the curtain choosing the foods on our grocery store shelves?

It's us. We are behind the curtain. That's right: fattening and unhealthy foods are on our store shelves because we put them there.

This is why consumers have such a critical role in deciding what is available to us in our stores and markets. Exercise your power by spending your money accordingly.

Readers, share your thoughts!

Note: I owe a debt of gratitude to two exceptional books by Nicholas Taleb: Fooled by Randomness and The Black Swan. Both were instrumental in helping me think through issues raised in this post. Things are not always as they seem.

Related Posts:
Who's Watching the Watchdogs? Ethical Problems in the "Ten Riskiest Foods" Report By the CSPI
The Pros and Cons of Restaurant Calorie Labeling Laws
How to Give Away Your Power By Being a Biased Consumer
Brand Disloyalty
A Rebuttal of "The Last Bite"

How can I support Casual Kitchen?
If you enjoy reading Casual Kitchen, tell a friend and spread the word! You can also support me by purchasing items from Amazon.com via links on this site, or by linking to me or subscribing to my RSS feed. Finally, you can consider submitting this article, or any other article you particularly enjoyed here, to bookmarking sites like del.icio.us, digg or stumbleupon. Thank you for your support!




13 comments:

NMPatricia said...

Absolutely agree with you. I believe that the food in the grocery store is there because that is what sells the best and is in demand. That is why OG produce is slowly creeping into mainstream grocery stores - they can make money at it now. However, for those of us who have changed and continue to refine their eating habits to be first order mostly, it is frustrating to try to shop at mainstream grocery stores. Because the lower "demand", there is less of a choice and a greater price tag. Also between those two, it makes it more difficult for someone just starting to make changes to make them. I know it is economic reality, but it becomes the chicken and the egg for the change to happen.

Charmian @Christie's Corner said...

Darn you, Dan for being so logical and balanced in your arguments. I have nothing intelligent to add.

Love the mutual fund analogy. I'm now curious to learn about the failed food items. The only example I can think of right now would be grape flavoured potato chips. I'd love to know about some other spectacular culinary duds -- although I think that would hijack your post.

lyttlebyrd said...

I started reading your blog with the "Laughably Cheap" roundup of recipes and have been following since. I have enjoyed it muchly, and I wanted to let you know. I co-moderate "The Kitchen" at somethingaboutapony.com. It's the site's food idea and news message board, and your blog has been quite helpful with recipe and article ideas. Thank you.

I really enjoyed today's post. It is easy to blame Big Food, but how often do we look at what we put in our cart? I learned to shop the perimeter years ago, and it makes a big difference. With all the beautiful, fragile produce, dairy, deli meats, and fresh breads in my cart, I have a lot less room for the junk in the center of the store, and have to think more carefully about the "center store" purchases. Even my children, age 2 and 6, are starting to learn the difference and help me shop accordingly.

bashtree said...

I think you're so right, Dan. A lot of the crappy food available is there because of simple economics. And while there is a lot of research that goes into engineering food that will be more 'palatable' to folks, ultimately FOLKS are the ones that buy the food again and again. I don't know how they do things in other parts of the country, but I have never had a food industry bigwig force anything into my cart or down my throat. Thanks for the balanced perspective.

Joanne said...

So I was actually thinking about this the other day when I was watching Food, Inc. I don't know if you've seen it but there's a part where this family is talking about how they just can't afford fresh produce and so they go for things like soda and junk food because it offers them enough calories for a low price. And shockingly, I found myself actually thinking "Thank god that there is something that this family can afford that will feed their children." I kind of hated myself for thinking it. But c'est la vie.

On the other hand, what would happen if such products just stopped being produced at all. Then consumers would have no choice but to buy the healthier goods, whether they liked it or not. It's an interesting proposition.

I avoid all of this by not buying processed foods at all. It's much simpler than trying to navigate all of the psychology behind all of this.

Daniel said...

NMPatricia: Interesting point, but it stands to reason that if you are part of the "food forward" you'll be disappointed in much of what's in your traditional grocery store. I guess it's analogous to being into obscure but really good music and trying to find that music at Wal-Mart.

Charmian, I'm more than happy to cede a follow up post to you if you want to look into some failed foods. I'd love to see what you turn up.

lyttlebyrd: Thanks for your feedback and positive vibes. And your kids are lucky that they are learning these concepts at a young age.

bashtree: I think it gets back to my recent post on "How to Whine About Big Food"--it's a lot easier to whine or blame somebody else than it is to take power and effort into your own hands and admit that the choice is yours. Thanks for commenting.

Hi Joanne: I just don't see how anything in a grocery store can be as cheap per calorie (or per nutrient) as something like a bag of potatoes or a bag of lentils. I still stand by the arguments in my "Stacked Costs and Second Order Foods" post. I think your technique of setting aside all processed foods and avoiding the psychology of these foods is a really useful one.

DK

Wirehead said...

Oh no. Now that we're talking financial metaphors.... I guess I'll have to bring some more parallels. :)

Both food and finance often have somewhat perverse rewards. If I twiddle with things, even using solely legal maneuvers, I can make an unprofitable company look profitable for a short period of time. Depending on my compensation, I might even have heavy fiscal incentive to do this instead of care about long-term profits.

In the same way, Big Food has a heavy incentive to make products that fly off the shelves, even if they are unhealthy and taint your tastebuds.

Finance is even worse, because you could measure long-term performance of funds in ways that you can't with foods. Whereas food has too many things where science just hasn't cracked the code yet.

Daniel said...

Wirehead, thanks for your insights (and you don't to get me started about all the gray areas in accounting and finance!). :)

Regarding how incentives can be skewed over the short term: I think if the consumer thinks long term about his/her health and well-being--and spends accordingly--companies will respond accordingly. It's still up to us.

DK

Daniel said...

One more thing, I wanted to add to this discussion a partial list of processed food products that didn't "survive":

Jolt Cola
Oreos O's Cereal
Rice Crispies Treats Cereal
Ice Cream Cones Cereal
Hydrox Cookies
Nutty Wheat Thins
Bar None Candy Bars

I'm sure there are many, many more. Can anybody come up with any others?

DK

chacha1 said...

I remember back in the '70s my Mom used to get us Carnation Breakfast Squares and some kind of food stick (astronaut food craze ... remember Tang?). The Carnation sticks were kind of like Tootsie Rolls only with, you know, some nutrition. :-)

Later it was the Carnation Breakfast Bars, precursors to pretty much all of today's meal-replacement bars.

They tasted hella better, too.

Anonymous said...

Your argument is completely valid under an entirely free trade market where the products consumers buy are the ones that stick around. Unfortunately, we are far from a free trade market with our system of subsidies and powerful food company lobbies. Food companies are not "evil" but they can get away with far too much under our current system. Consumers do not have the information we need to make educated decisions about our food (such as GMO labeling), and large food company lobbyists are doing all they can to make sure that their interests are protected. This makes it difficult for smaller companies that would otherwise be able to compete handily because of consumer choice alone. That being said, I wholeheartedly agree that the choices we make in the grocery store have a great impact on the food market and what is available, and we as consumer can still be very powerful - don't give that power away!

Daniel said...

Hi Anonymous, thanks for your input. And fair enough on ag subsidies.

But the fact remains: if consumers stopped buying any given food or consumer product, it would stop appearing on our store shelves.

That's the key, and it's the central point to this post. We complete the circle by consenting to buy the goods that are sold to us.

DK

Anonymous said...

As Pogo said,"We have met the enemy and he is us."