And how to get rid of “entrepreneurial biases”.
Time to open your eyes and look in the mirror..
Welcome to ‘The Art of Thinking Clearly — Startup Edition’.
I’ve put together this list of the most common, life-sucking biases entrepreneurs live with.
These biases are like mirrors. Look closely and identify how you kill clarity of thought. Get rid of these and you will be able to think clearly.
Table of Contents
Bias: You see successful startups and trending entrepreneurs all around you. You overestimate your chances of success.
Reality: The probability of making it big is a small fraction above zero. Most startups fail.
Swimmer’s Body Illusion
Bias: You think another entrepreneur’s idea was successful because they got funding. You start chasing funds like a maniac.
Reality: They got funding because their idea was successful. Ideas have no value by themselves.
Bias: You build a startup in the ‘new shiny technology’ which everyone is starting to work on. Worst than that, you build a startup because everyone else is building a startup.
Reality: Even if 50 million people are talking something stupid, it is still stupid. The new tech everyone is chasing will not work if it doesn’t have to, no matter how many people chase it.
Sunk Cost Fallacy
Bias: You continue to invest time and money in your startup even when you don’t see results, just because you’ve already invested a lot of time and money in it.
Reality: The time you’ve spent is gone. What counts now is how it can perform in the future.
Bias: You cannot identify faults with your startup or business model. If someone comes up with one, you file it as an ‘exception’.
Reality: It takes the effort to question your own theory. Always try to find faults and look for indications of the contrary. In most cases, you’re wrong and they’re right.
Bias: You ship your favourite features, or the features your tech team can build easily, instead of the ones that really matter.
Reality: You need to find a solution to ship what your customers really need, not what is easy for you to ship.
Bias: You hear the amazing stories of big entrepreneurs like Steve Jobs. This leads you to take big risks and make your own story.
Reality: People make stories by building meaning into things afterwards. They filter things, hide things under the rug, and present only the information which fits in the story.
Bias: You think you’re different and you can beat the odds. You estimate your chances of success toward the high side of the scale.
Reality: Entrepreneurial activity will be a lot lower if the overconfidence effect did not exist.
Bias: You bid for advertising space and increase your bid to get the top position or to outdo your competition. You think you’re the winner.
Reality: The winner of the bid often turns out to be the loser, by paying over what they should for the specific acquisition which eventually becomes a loss.
Fundamental Attribution Error
Bias: Your business fails and you blame this to your team manager resigning or a new product launch succeeds and you give credit to employee A or B.
Reality: The same team and employees will produce both success and failure time to time. Instead of attributing success or failure to individuals, analyse what’s wrong or right with the process and the external influencers, to create more successes.