Startups, Emotions & Decision Making

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The startup world is a very diverse place. People are often confronted with situations that are very uncommon for those who don't regularly touch entrepreneurial ground. Especially the fact that founders and leaders are being led by their feelings and emotions has a huge impact on their decision making process.

When reading how founders and early stage employees experience startups we usually get two very contrasting answers. It’s either “IT’S AWESOME!” or, to quote Elon Musk, “Being an entrepreneur is like eating glass and staring into the abyss of death”. Why this contrast? Can success be the measure? Not when the most successful entrepreneur of our times is on the “eating glass” side. What does the truth really look like? As always, it depends. All sides are affected by emotional swings. These swings come from focusing too much on outcomes instead of a reliable decision making process.

Ben Horowitz said: “By far the most difficult skill I learned as a CEO was the ability to manage my own psychology. Organizational design, process design, metrics, hiring and firing were all relatively straightforward skills to master compared with keeping my mind in check.” The better our ability to handle all the ups and downs of a startup, the bigger chances we have to succeed.

Humans are far away from rational thinking. We act based on our emotions more often than we want. The biggest hurdle is excessive risk aversion. In a time where everything on earth was out to kill us, being very risk averse made sense but now we have a society that offers plenty of support. Our risk aversion has become too high compared to the reality of our time. People who are into startups have generally passed this but still have a hard time explaining it to non-entrepreneurial people.

We should not hide from our emotions. Instead we should consciously analyze why we feel the way we do and account for the cause of certain emotions when making a decision. We cannot completely detach us from emotions since they are a part of us as much as the rational side is. I recommend reading “Thinking: Fast and Slow” by Daniel Kahneman. He goes into deep details on dual process theory and how it impacts stereotyping, categorization, and judgment.

The first clue that our emotions are not driving us towards the best solution is when they are a by-product of events we cannot control. As humans, we cannot predict everything that happens in the world. It’s normal to have many unpredictable, random events. These events can be both favourable or unfavourable. We should learn to identify situations where such events cause certain outcomes that make us either elated or miserable. The better we get at it, the more we realize that our previous emotional rollercoaster was caused by events beyond our control. A very good read on how these events impact our day to day life is “Fooled By Randomness” by Nassim Taleb.

As founders or early employees of a startup we have a bigger responsibility. We make the final call in more situations and thus randomness has a bigger impact on us. That’s why it is important to master our mindset. The outcomes are not certain, even when the best decision is obvious.

The best way to decide whether a decision is correct or not is to reflect about it. If we had the exact same information at our disposal again, would we repeat the decision? What information can make us change our mind? Any event beyond our control and unattainable information should not change our initial decision. We must not be Captain Hindsight! Discipline and persistence will take us a long way. Few people succeed in their first venture but those who learn from their failures will reach the top.

 

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