Business people usually start companies for one simple reason: they want to build something extraordinary or special that will unconditionally succeed and last. Well, nobody can argue with an idea of dreaming big. Even Steve Jobs agreed on that in his famous quote: “We’re here to put a dent in the universe. Otherwise, why else even be here?”
"People believe that only
best-case scenarios or optimistic
outcomes would happen
The root of the trouble is not what people want or wish to happen. It is how blatantly they ignore the chance of what they wish to happen could come true. And this weird evolutionary blind-spot has clearly become a part of routine human intuitive behaviour. We believe that only best-case scenarios or optimistic outcomes would happen to us. Our intuition mostly ignores any logical reasoning to prove otherwise.
Now we can understand better why businessmen totally ignore the odds of their companies could fail. But under the surface of their ignorance, there are two completely different pathways that should be carefully identified: one path is based on uncertainty (with some variable elements), but the other path is based on probability (with some fixed elements).
Take this example: Imagine a business executive who also happens to be a successful company founder and owner. Which statement is more likely to happen in the future:
- That a businessman will set up a successful company;
- That this successful owner will set up another successful company.
If you are a normal person, your choice would be the 2nd answer. Do you have any idea why have you selected particularly the 2nd answer? Well, you may think you do—but your choice was purely your brain’s intuitive judgement.
Let’s try it again. Are you still going to stick with your previous choice? If you did not change your answer, then your intuitive judgement was wrong. Why?
Before making any decision you should know the facts. But you had only irrelevant or random information. Here is what you did know:
- A business owner founded a company which subsequently became successful;
- He is now both the owner and executive in his successful company.
These are the facts. Nevertheless, you have still intuitively assigned higher probability to the 2nd answer.
"...your brain intuitively created
a coherent story that was based
on limited and irrelevant
It’s because your brain intuitively created a coherent story that was based on limited and irrelevant information. It seemed more likely to you—due to some psychological effect known as availability bias. As a result, human intuition works instantly only with the data available. Intuitive mind does not care about the quality or quantity of information at hand or about information that is missing.
Why business people don’t really care about the future of their companies? It’s because they ignore reality check that could lead them towards more realistic predictions. And ignoring laws of probability is the reason why so many companies must fail.
But they still can blame the fate.