This blog post was written by Alec Miller, Manager of Measured Innovation at TechAlliance
Start-ups are often risky and chaotic messes – it’s kind of crazy that anybody would want to get involved with one. But for those that do, I can think of no better general purpose business skill than to study cognitive biases in others, and more importantly, in oneself.
In this post, I’ll give a very quick overview of brain science and cognitive biases, and then say a few words about how this might apply to a particular bias that I have seen in many entrepreneurs that I’ve worked with.
The rational part of your brain is not always in control
The last 20 years of fMRI brain scans, advances in neuroscience and behavioural economics have shown researchers that the human brain likes to take short-cuts and play tricks on us when deciding what to perceive, believe, and how to act in a given situation.
The human brain has, over the course of its evolution, developed three distinct sub-systems which regulate various functions. The oldest part of the brain, the reptilian brain stem or cerebellum is responsible for survival and reproduction. The mammalian brain or limbic system regulates memory, emotion, and hormones. The cerebral neocortex is the key distinguisher of the human brain which allows for abstract reasoning, self-reflective consciousness, problem solving and other executive planning functions.
Without getting too technical, the important thing to realize about this three-tiered structure of the human brain is that although we are fully capable of using our rational faculties, we are often highly biased in our decision making. The older parts of our brain, those responsible for survival, can have a disproportionate influence over our actions than the newer, more rational parts of our brain.
Put more simply – we have the capacity to be wise and reasoned in our choices, but far too often we fall victim to subtle and unconscious tricks that our brains, in relation to our environments, play on us.
What is a cognitive bias?
Learning about these mental tricks and how to prevent or mitigate their impact is a useful skill for entrepreneurs to develop. This is particularly true because entrepreneurs often operate under conditions of extreme uncertainty (which tends to be a breeding ground for cognitive bias).
One of the most common cognitive biases that I have seen in entrepreneurs is confirmation bias. Confirmation bias is defined as the “tendency of people to favour information that confirms their beliefs or hypotheses.”
In the context of entrepreneurs and their start-ups, this could mean cherry-picking market research facts that paint an unrealistically rosy picture of their opportunity, or interpreting neutral feedback from partners (i.e. “sounds interesting…come back when you’re further along”) as positive reinforcement.
As the famous philosopher of science, Karl Popper put it “If we are uncritical we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories. In this way it is only too easy to obtain what appears to be overwhelming evidence in favor of a theory which, if approached critically, would have been refuted.”
Tools to help out-smart your own brain
Given how prone the human brain is to look for data that fits its pre-existing beliefs (and block out those that contradict them), and given the uncertainty associated with start-ups, entrepreneurs can benefit from a rigorous and critical method used to validate their opportunity. In this regard, the Lean Startup is a great guide for entrepreneurs to make their assumptions explicit, get real customer validation, and avoid potentially expensive mistakes caused by the trickster that is the human brain.
For those who want to learn more about the many tricks our brains play on us, the good folks over at Wikipedia put together an exhaustive list of cognitive biases. Additionally, books on behavioural economics by authors like Daniel Kahneman are another great source for information on this exciting field of research.