Avoiding the Cognitive Biases That Can Sink Your Startup
By Steve MacDonald
I’ve been an entrepreneur and investor for decades, a boat owner for even longer. If there’s one thing both startups and ships need, it’s a captain and crew who understand where the boat is going.
Basically, is everyone sailing the same direction, toward the same goal? Have you created a strong vision and focus? Does your crew share that vision and focus? The business term is “being in alignment.” Getting everyone aligned is crucial if you want to succeed.
But steering the ship also means navigating the cognitive biases and blinders that we all have. A cognitive bias is a systematic error that can ruin your decision making. Here’s a few big ones:
The Bandwagon Effect. Other people are doing it, we should too! Except that’s a terrible reason to do pretty much anything. What makes your company distinctive? What problem does it solve? How does it solve that problem better than anyone else?
Egocentric Bias. My maxim is we’re all at the center of our own universe. That makes it hard to see what others see. It also means you have to regularly make an effort to step beyond yourself to see what others see.
Empathy Bias. It’s important to understand where others are coming from. Sometimes they have really good ideas, or well thought-out concerns. But empathy can be a double-edged sword. When you’re creating something new, you have to be confident in yourself and your ideas, even when others aren’t. Henry Ford, whose Model T was the first mass-produced car, said, “If I had asked people what they wanted, they would have said faster horses.” Exactly.
Overconfidence Bias and Pessimism Bias. These are two sides of the same coin, connected with Egocentric and Empathy bias. Some charge ahead into a disaster because they don’t really know their strengths and weaknesses. Others are paralyzed by a lack of confidence, certain that a new initiative will fail, so why bother to try? Pessimism bias is even hard-wired into the human species. It reduces risk, which made sense back when cave dwellers were deciding whether to attack that saber-toothed cat. These days, the stakes are a little lower. You have to be confident in your vision, but aware of your limits; willing to pursue the big thing, while understanding other people’s concerns.
Elon’s Law. Elon Musk is many things, in part because of what I call Elon’s Law: “Missing deadlines is a feature, not a bug.” He’s jumpstarted the electric car industry, commercial space business and other sectors in part because he sets audacious goals. When you set audacious goals, you miss some deadlines. But not being afraid of missing deadlines can make the seemingly impossible happen, faster than you think.
And finally, let’s talk about alignment more generally. It’s not a bias, bug or feature. It’s an absolute necessity.
A company without everyone aligned to the same goals is like sailing a boat without a rudder. You may get there, but your route will be roundabout, rough, and painful.
Start by asking a lot of questions. Don’t pussyfoot around about your expectations. You may have to be in people’s faces. Dig into what they’re thinking. They may not want to say what they’re thinking, but keep pushing. Don’t let them shine you on, or tell you what they think you want to hear. This is too important to screw around or settle for less.
If employees won’t buy in, why? Maybe you didn’t consider something. But at bottom, If they’re not getting on board, you have to act decisively. Be ready to leave some people on the shore. If they’re not as committed as you are, you not only don’t need them, you can’t afford to keep them. Help them out the door. Same with go-along people who don’t really care.
Otherwise, they can be a cancer on the organization, like an anchor that didn’t get pulled on board, dragging the bottom just as you hit the throttle. And if they stay on board, they’ll slow everyone else too.
Maybe that’s sounds harsh. So what? It’s about getting the right people in the right positions. You’re building something special. Not everyone is a good fit, and should leave. That’s okay.
Once you’re with the right crew, you have to make sure you’re staying on course. I rely on information dashboards to track success. They tell me how my company is doing in real time. Without them, you’re sailing without a map.
I use the dashboard to objectively measure key performance indicators in a granular way. Then I hold my crew accountable for their contributions, and make sure they’re still aligned. If they’re not, changes need to be made.
It can be uncomfortable. It requires constant attention. But if you want to succeed, you need to understand the cognitive biases that will throw you off course. And you need to make sure your crew is sailing in the same direction you are.
