Hope, confirmation bias and entrepreneurs

Entrepreneurs are often trapped in a vicious circle of hope.  Hope clouds judgement and can be what prevents the entrepreneur seeing things clearly and taking the appropriate decisions.  Hope is so seducing that it’s what is used in most personal development or “get rich in x lessons” books.  Hope is also so powerful and rewarding that it is fed by proofs generated by the confirmation bias, that is itself fueled by hope. Entrepreneurs must learn its underlying concepts and learn to get objective opinions from others.

Confirmation bias refers to a type of selective thinking whereby one tends to notice and to look for what confirms one’s beliefs, and to ignore, not look for, or undervalue the relevance of what contradicts one’s beliefs.  [Skeptics Dictionnary]

Before talking about confirmation bias, let’s understand what is hope from a psychological point of view.  Hope is one of the many mental defense mechanism we have that is triggered in order to disconnect us from hurtful emotions (anxiety, sadness, despair, ….).  It uses thoughts to construct a positive scenario of the future.  People often grab these thoughts as a life buoy to avoid the reality of the present moment. We usually hope for a better future when we are  uncomfortable with the present.  Hope is what drives many wantrepreneurs.  Hope will make entrepreneurship’s book writers rich, not you.  Happy people hope for the best, once, then stop thinking about it.

In order to fuel hope, you need proofs that what you see in the future is possible and is likely to happen. This is when the confirmation bias enters into action. Every single proof you see that makes your predictions credible is highlighted, while every single piece of evidence that it won’t is denied. Those proofs stimulate hope that itself forces you to suffer from the confirmation bias. It’s a vicious circle.  One great example of the relationship between hope and the confirmation bias is seen with believers of the 2012 end of world event.  They can point to you dozens of  scientific  studies that prove it will happen, ignoring the hundred other proofs that it won’t.  One seducing thought in the 2012 case is that the event can potentially make them better than they are now.  Hope is triggered by a desire for change and fueled by confirmation bias.  Desire for change is not the only way to trigger hope.  Any unwanted emotion, such as fear, can also be a very good motivator: some religions claim that if you are not a good practitioner, you won’t go to paradise, but burn in hell forever. With entrepreneurs the desire for change is the key to the process.

Hope & Confirmation Bias

Conscious thinking is not the only factor: things get worse when we take into consideration theories of biological psychology.  Desire to change is not the only motivator for hope. There is a physiological reward for the behavior. Dr. Robert Sapolsky, professor of biology and neurology at Stanford University conducted experiments that showed that there is a direct link between hope and dopamine (pleasure hormone) releases in the brain.  Studies even show that we get higher dopamine releases when there are more uncertainties. Uncertainties? That is certainly something that entrepreneurs can relate to.

The ability to cope with temporary difficulties is one of the entrepreneur’s required abilities. Too many people can’t go through what Seth Godin called The Dip.  Defeatism, the opposite of hope, is one of the obvious failure factors in entrepreneurship.  Often they decide to stop.  They think their efforts are not worth it anymore.  Defeatism works just like hope. Your judgment is biased and you see things from the negative side.  It is also fueled by the confirmation bias in the same way.

The Dip Illustration

Optimism is often suggested as a strategy to fight defeatism.  It’s true that if you tend to be defeatist, hope can counter balance the feeling by replacing negative thoughts by positive ones.  It’s positive psychology. And it’s even suggested by the Emotional Intelligence guru Daniel Goleman.

Having hope means that one will not  give in to overwhelming anxiety, a defeatist attitude, or  depression in the face of difficult challenges or setbacks. [Daniel Goleman]

Just as defeatism must be avoided, hope can’t be a strategy on the long term. It can even  hurt as much as defeatism.  Do you remember how you felt after you really hoped that something would happen and it did not? You would be really surprised if you noted each prediction you make and compare them with what actually happened.  Hope will play against you.  It will hurt, it will hide a more concrete problem, and more importantly, it will bias your judgment.

Self awareness, again, is the key. To manage the process, consider hope (or defeatism) as a signal you must decode by being aware of the physical and psychological mechanisms. If we suspect we are biased, we must not believe entirely what we think and assess every hypothesis we make with realistic information.  Market studies and/or customer development are ways to assess our assumptions, as well getting mentorships from more experienced people who have learnt the hard way. With some practice, you will be able to acquire the self awareness required to avoid being trapped in those loops. Be a mindful hacker.

 

 

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If you know neither the competition nor yourself, you will fail

There are two common types of behavior I have noticed in people regarding their competition. You have the competition driven people, and the competition denial people .

The first constantly monitor their competitor’s activity by visiting their websites & forums or googling them constantly, while the latter meticulously try to avoid any piece of text mentioning their names.  Sometimes, the latter behaves like the former by accident, triggered by some source of information they have read by mistake… Both emotionally driven behaviors are very dangerous for their business.

A third widespread behavior, linked to the same concept, is to not enter a market because of the presence of one or more competitors or even worse, entering a market without studying the competition in detail. All these types of behavior will make your business decisions weaker. The solution is to take your competition for what it is, no more, no less and try to intelligently decode your emotions and thoughts (both are linked).

When someone is competition driven, he will often take any of the competition’s initiatives as something he doesn’t have (and therefore he must have), instead of taking it for what it is: an initiative that can be equally good or bad.  The resulting action is to try copying the competitor’s ideas (but perhaps doing them better…). The problem with that behavior is that the competition will always be significantly in advance and the market will inevitably perceive him as the follower, not the leader, constantly competing on basic stuff such as features & pricing.  It’s not only his innovation that will be affected, but his overall entrepreneur’s ability to take good decisions.  Being so abnormally obsessed by a competitor can be the start of very serious trouble possibly leading to burnout or worse, to the abandonment of the venture.  His fear of competition is irrational.  Many of his important decisions will be biased by his distorted perception of his challengers.  It’s not how he should develop a wealthy company.

Competition denial on the other hand, is the action of ignoring the competition completely. This is a very commonly suggested strategy to solve the results of competition driven behavior. That is, by ignoring anything the competition do, his judgment, innovation & decisions are not affected by what they are doing. After all, he may say, listening to the market and customers is the only valuable thing to do.  Instead of being competition driven, he becomes customer driven.  It’s a seducing way to drive your business, but ignoring the opponent can hurt you as much as being obsessed by them.

If you know the enemy and know yourself, you need not fear the result of a hundred battles.  If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.  If you know neither the enemy nor yourself, you will succumb in every battle.

Sun Tzu, The Art Of War

This is something I learnt from practicing martial arts. Before an important fight, you must watch videos of your opponents previous battles (or previous fights in a competition).  Watch how he moves, what he is good at, what he sucks at.  It will helps you develop effective ways to attack him and defend yourself.  Strategy is not the only important thing in a battle.  Attitude can make all the difference.  If you have a very determined opponent in front of you, this will affect your morale during the battle, and therefore your performance.  Invest in strategy by analyzing the market, including competitors, and in self confidence.  The former will help your differentiation in the market.  The later will surely contribute to making your competitor fear you, leading them to one or both of the unwanted behaviors described in this post, and making you the leader. Maybe.