When emotionally invested, even seasoned professionals can ignore their own expertise. The speaker, a researcher, sought validation from biased sources like friends instead of conducting objective market research, proving that personal attachment can override professional discipline.
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Contrary to the belief that big B2B decisions are purely rational, they are more susceptible to biases. With infrequent, high-stakes purchases like enterprise software, decision-makers face greater uncertainty and are more likely to rely on mental shortcuts and biases like social proof.
Post-mortems of bad investments reveal the cause is never a calculation error but always a psychological bias or emotional trap. Sequoia catalogs ~40 of these, including failing to separate the emotional 'thrill of the chase' from the clinical, objective assessment required for sound decision-making.
Our emotional connection to pets makes us almost completely incapable of objective observation. We invent stories and infer motivations that often don't align with scientific reality. This highlights the power of cognitive bias in personal relationships and the need for objective data in understanding behavior.
Successful investing requires strong conviction. However, investors must avoid becoming so emotionally attached to their thesis or a company that they ignore or misinterpret clear negative signals. The key is to remain objective and data-driven, even when you believe strongly in an investment.
Our brains are wired to find evidence that supports our existing beliefs. To counteract this dangerous bias in investing, actively search for dissenting opinions and information that challenge your thesis. A crucial question to ask is, 'What would need to happen for me to be wrong about this investment?'
No matter how intelligent you are, personal bias clouds judgment. For all significant decisions—personal, professional, or economic—consult a trusted "kitchen cabinet" of objective advisors. This external perspective is crucial for sound decision-making and protects against isolated thinking.
People underrate the power of being genuinely liked. When someone has a positive gut feeling about a founder, they will mentally "retcon" or create reasons to justify their support, making the founder's message seem more compelling than it might objectively be.
Research on contentious topics finds that individuals with the most passionate and extreme views often possess the least objective knowledge. Their strong feelings create an illusion of understanding that blocks them from seeking or accepting new information.
The brain's tendency to create stories simplifies complex information but creates a powerful confirmation bias. As illustrated by a military example where a friendly tribe was nearly bombed, leaders who get trapped in their narrative will only see evidence that confirms it, ignoring critical data to the contrary.
To prevent reactive emotions and confirmation bias, adopt a strict personal rule: it is "illegal" to form an interpretation or an emotional response until you have gathered all available information. This forces a pause for critical thinking and objectivity before solidifying a perspective.
