Avoiding Entrepreneurial Bias Traps

— by Mike Sharrow

On January 28, 1986 the world watched as the US Space Shuttle Challenger burst into flame mid-flight, tragically resulting in the loss of 7 astronauts.  It was an A-team, on a multi-billion-dollar launch vehicle, supported by some of the greatest minds embarking on a well-thought out plan.  All of that was infuriatingly compromised by the intersection of a climate factor and 1 seemingly insignificant part (O-ring).  Worse yet, there was a whistle-blowing team member who was dismissed.  Every leader, every venture – regardless of how well capitalized, strategized and planned – has O-ring vulnerability (video).  

Jim Collins famously highlighted in his management classic Good to Great that one of the hallmarks of enduringly great businesses was their capacity to “embrace the brutal facts.”  He pithily chronicled companies that had meteoric success followed by crippling demise with epitaphs like “they didn’t like the answers [advisors] gave them, so they [dismissed] it.”  His research found that one of the dominant themes for great companies was that breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another.  His team found that “the moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse.”  Does your team have a discipline of embracing the brutal facts?

Entrepreneurs by nature are predisposed to optimism.  You wouldn’t take the risk of utter failure and the marathon of late nights, sweat equity, risk-bearing pursuits without a deep sense of optimism in “the plan.”  There’s a different between unbridled optimism (what the Bible describes as reckless zeal), and “informed optimism.”  Success is rarely hinging up such simple, binary factors of is it a good or bad idea – rather, it’s dynamically nuanced by factors like when, how, why, and what else is also true.  There are psychological bias factors common to all of us – but these liabilities can be minimized if we lean into the light, embrace inconvenient feedback and establish systems of constructive accountability.  Which of the 8 major decision-making bias traps are you or your team most prone to?

When discussing this very issue with thousands of C12 members across 300+ peer advisory groups in early 2019, we found the same line of thinking must be tested against how we evaluate people, products, business units and strategies.  Borrowing from the talent top-grading thinking, we found this 2x2 matrix and set of questions constructive: 

For whatever or whoever falls into the bottom left quadrant, we can ask ourselves

a series of questions to determine whether we should invest in efforts to improve

its position or prune altogether.

— Can the issue be fixed?

— Has enough time passed to demonstrate the problem is not a season that may organically pass?

— Have previous efforts been devoted to the issue and failed?

— What is the subject's disposition and trajectory?

— What is the cost of not dealing with that person or product?

— Am I falling into one of the eight psychological traps of decision-making?

Consider this story by an entrepreneur who realized that in order to scale her growing ecommerce business while also scaling a flourishing marriage, Christ-walk and home life she would have to cut a profitable business unit despite all sense of “I can do it all!”  (Case Study)

As is often true, our greatest strengths can be our greatest liabilities left unchecked.  The very optimism and bias for the possible is likely what fueled much of your success.  How will you harness Biblical wisdom to ensure that the very accelerant for success is not the contaminant for your faith-driven endeavor?

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[ Photo by Justin Wei on Unsplash ]