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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6 steps to safely quit your job and launch your tech start up

Many students and future entrepreneurs ask me how it is possible to leave their job and security without the risk of ruining their life.  In fact, this fear is irrational as is the illusion of security in your job.  That will be subject of a future article, but in the meantime here’s the one thing I generally recommend for start up without risk.

You must have enough money put aside to support you financially for an entire year.

If you do not, you will be at the mercy of each little setback, making your journey much more difficult.  And to launch your start up without working on it full time will also affect your chances of success.

Here are the 6 steps you need to go through to quit your job safely:

  1. Reduce your monthly expenses to a minimum
  2. Save any extra money
  3. Increase your income
  4. Get ready for the adventure
  5. Negotiate your departure
  6. Commit yourself fully

The first three points can be found in dozens of books on managing personal finances, with the common denominator : spend less than you earn and put the money aside.  The aim of these three points is to get yourself into a good financial situation.   The final three points are really important for a good start.  Missing one step can act against you.

Here’s an explanation of the 6 steps:

Reduce your monthly expenses to the minimum

Have a modest lifestyle then you can dramatically increase your level of freedom and your ability to seize opportunities. People with a very high standard of living are often prisoners of this lifestyle and slip into a vicious cycle called The Rat Race. They are on the treadmill never able to stop, because stopping would mean big problems. Having a modest lifestyle is a luxury accessible to all.

Get rid of all the unnecessary stuff in your life.  This could include selling your expensive car, reducing your frenetic shopping and the number of meals out in restaurants every month.  Instead of an expensive gym subscription try running or cycling outdoors.  Consider swapping your shiny, new, latest generation iPhone for a second hand android and don’t forget to cancel all the subscriptions that you don’t really use.  Next summer instead of going abroad to a 5-star all inclusive hotel try camping or bed and breakfast.

Worried about loss of your well being? Scientifical studies (Malka/Chatman 2003, Baucels/Sarels 2010, Boyce/Brown/Moore 2010 & Krugman 1999) prove that once your basic needs are met, any extra money won’t really affect your happiness. In fact, too much stuff in your life may introduce boredom and anxiety. More is less.

Still worried? Don’t forget it’s just temporary until you can afford it (again). In fact you should never buy anything you can’t pay for with cash. If you can’t pay in cash (with the exception of your house), it means you can’t really afford it. You’ll be able to buy all the luxury you want with the extra money you’ll get from your successful company.

I personally sold my brand new luxury car (Mercedes ML) for a simple and cheap second hand utility car (Ford Transit Connect for less than 8K). Less happy? On the contrary! Liberty of choice is priceless.

Save any extra money

The difference between your income and expenses, is your ability to save.  The bigger the gap is, the faster you will reach the goal of the equivalent of one year of expenses. If your start up requires an initial investment, you must include this in your calculation.

We saw earlier that your income, after a certain point, won’t affect your happiness much. Lack of savings can really affect it (Gavin 2005).

What you do by taking all your extra money is pay yourself first, a lot. Here are the definition from Investopedia:

A phrase commonly used in personal finance and retirement planning literature that means to automatically route your specified savings contribution from each paycheck at the time it is received.

Because the savings contributions are automatically routed from each paycheck to your investment account, this process is said to be “paying yourself first”; in other words, paying yourself before you begin paying your monthly living expenses and making discretionary purchases.

Increase your income

To speed up the process, I strongly recommend you increase your income.  You can do this simply by asking for a raise (it works, really, just try), finding a second job on weekends or evenings, or by getting rid of all those gadgets that you do not need anymore by selling them on eBay (whatever you may think of it). Ideally, you can do all three at once!

One really original way that I have had occasion to test with success is proposed by Timothy Ferriss in his book The Four Hour Workweek.

Please note that this mustn’t be to the detriment of a well balanced life. If you really can’t afford to work extra hours, don’t do it.

Get ready for the adventure

Just because you work full time elsewhere does not mean that you cannot clear a little time to prepare your start up. This need not be more than 4 hours per week. If you have to choose between working more (previous step) or this one, pick this one!

I highly recommend that you use this time to talk to the potential customers of your projects. This will allow you to adjust your business plan in order to develop a product that truly meets market expectations.  This is called Customer Development.

Many start ups fail because the entrepreneurs have never talked to customers and therefore “derived” requirements based on their own experience. What they did not know is that their experience is unique, and often does not reflect reality.

Starting well prepared will help you to face the challenges in a more serene manner. Of course you cannot predict everything, but read enough about the subject and you can protect yourself from most common mistakes.

Additionally, start to subscribe to every major blog of your industry and follow the specialized press. Watch similar companies and try to attend to few trade shows to observe the market.

Finally, to help you prepare, I recommend that you read Four Steps To Epiphany, you can get a pdf version here.

Negotiate your departure

Once you have gathered a year or more of expenses, it’s time to get started.

This is the simplest step, and yet it is one that can seem to be the most insurmountable! It’s not really the fact of announcing your departure to your boss that causes the most concern, but actually making the leap.

Many choose to apply for a sabbatical year (this is a legal right in some countries), others consider this step as a liberation in itself.

If you have fully realized the previous steps, you will be much more confident. You will have enough money to both achieve your business and live normally.

The most elegant way to announce your departure is to request a meeting with your boss and explain that you are going to try the great adventure.  During the interview, take advantage of their experience to ask for advice!   Send your official letter of resignation only after the interview.

Make sure that your departure is not too detrimental to the company and that your departure is not too painful for your employer.

If you are lucky enough to have a good boss, they will let you go without putting any obstacles in your way. Otherwise, they might try emotional blackmail.  If your departure harms your employer, it is likely because you have been poorly managed. It’s rarely your fault. This will be your first test: to deal with this while remaining professional.

Commit yourself fully

You have started!  Now you need to focus on your business full time.  This is no time to indulge in other things. If you chase two rabbits, you won’t catch either.  Don’t start two businesses at the same time. Focus on one and only one. You’ll be able to work on different things at the same time once you get more entrepreneurial experience.

You will probably read in many other information sources that the best entrepreneurs work 100h per week. I really think this is as ridiculous as it is dangerous.  It’s true that working many extra hours will provide you with extra productivity short time, but will likely harm you long term.  You must work hard, but not destroy your health, which is more important than all the money in the world.  In fact, I believe that working too hard can prevent you from being successful as much as not working enough!  Dead or burnt out, you are useless to your business. Your start up needs a healthy entrepreneur with a well balanced life.  I highly suggest you that you don’t work more than 9 hours a day, with regular breaks, including lunch time away from your computer.  Invest the rest of the time in what should be the most important: your family and yourself.

Whatever happens you have this advantage: you will not have the pressure of needing an immediate result. You know you have enough money to support yourself and in case of problems, you know you have the capacity for a much better job than you had before.

What if I fail?

The success of your business is not the subject of this post. That being said, you do need to consider failure.  Statistically, it is even quite likely that you will fail, but if you prepare properly you greatly improve the chance that you will succeed in developing a profitable business in which you blossom.

In the event that it just does not work, know that you come away from this adventure much stronger than before, which will greatly increase your chances of finding a better job.

The reason is simple: Employers love people who take things in hand, those that turn problems into opportunities.  They are quite rare and generally, people who can do this are probably already employed and so not likely to be applying for jobs, or have already set up their own business – this means these skills are in demand.

Indeed, fear of failure is so great that very few people manage to succeed as far as point 5 point, even the brightest. You will be in a unique position that allows you to find an exceptional job.

If you can afford it, save a little over a year in advance to give you a few more months to find a job in optimal conditions, ie without pressure.  For you, the key to finding a better job is that you have become more competent, with no debt and most importantly, with no regrets for not having tried.

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