The Psychological Biases of an Entrepreneur Explained
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You are on your way to the office in a cab, and you are checking your twitter. You read a tweet that one of the unicorn startups is launching the same product you have been slogging at for the last six months. I am sure this would have happened with many of the entrepreneurs. Do you realize the sinking feeling you go through? More importantly, do you know that this news influences most of the decisions you take that day or the next couple of days? But then, in a few days, your decision making is back to normal.
Availability heuristics is just one of the biases that entrepreneurs go through in their daily lives. Before the work of Kahneman and Tversky - the two psychologists quoted in most of the psychology books we read today, the predominant view was that human beings are rational. They did many experiments to prove the biases and heuristics that human mind experiences. And entrepreneurs are human beings - same biases influence us in our everyday lives.
When I was running my first startup, after every meeting with someone, be it an investor or an advisor - my cofounder and I used to have a profound discussion on how we can start working on the inputs provided in the meeting. We forgot one crucial thing. The advice people give is based on their experience and on what they understand of our business. The frame of reference of someone advising your startup is very different from yours. I have also realized how some people are so smart that they do not provide advice but always tell their story. They make sure that you understand what worked and what did not “in their circumstances”.
To or Not to Listen
A lot of people would advise you, and as an entrepreneur, it is essential to listen. However, I have seen a lot of people recommending on X things, while they have expertise on Y things. Taking it to the extreme, it is like you are Sachin Tendulkar and you are advising on paid marketing. Over the years I have trained myself to be careful of this Halo Effect.
‘Hype’ is Temporary
Another lesson that I have learnt is to never go with the hype - things are never as good or as bad as they are reported. If you want to prove this, just pick the newspaper from the last year or a year before that. You will realize that most of the headlines written at that time do not matter at all. Entrepreneurs go through highs and lows with a higher magnitude than other professions. Hopefully, the realization that most of the things do not matter much can help us remain more stable.
And since we are talking about highs and lows, I want to make another important point that I have learnt recently. There are more lows than highs. And that is the reason that entrepreneurs are sad for a longer time than they are happy. That is likely because entrepreneurs need to go through a lot of pain before they see achievements. Most don’t even see anything substantial results. For pure statistical reasons, entrepreneurship is a wrong profession if you are looking to maximize happiness. I am just hoping that I am wrong.
Human beings are irrational. Entrepreneurs are probably doubly irrational. Does knowing about our psychological biases make the chances of succeeding higher? Hopefully, yes.