Confirmation Bias: Reason Why Entrepreneurs Fail

By January 18, 2022 January 31st, 2022 No Comments

Do you think you make the right opinions about other people? If that is the case, then you, my friend, have become prone to confirmation bias. It’s a psychological phenomenon where we tend to perceive the information that aligns with our existing beliefs.

For example, you believe that left-handed people are more intelligent than right-handed people, and you see Ross, one of your friends, being creative, enthusiastic, and brilliant at performing. You start believing that principles you had thought were true are actually true!

When it comes to entrepreneurship, you have to be open to people’s opinions and judgment; how to deal with it?

This is what we’re going to see in today’s article:

What is Confirmation Bias?

Confirmation bias is a type of cognitive bias where people tend to process or interpret information based on their existing beliefs. Existing beliefs may include expectations about a certain situation or predictions about a certain outcome.

When you want a certain idea or concept to be true, you start looking for evidence that supports the notion and end up believing that it is true. It is a kind of biased decision-making that results in conflicts because reality may not always be true with our thoughts and desires.

Why Does it Happen?

One of the reasons behind confirmation bias is a natural way of decision-making. When a large amount of information is bombarded, humans tend to analyze it based on past experiences, convictions, and knowledge because it is more convenient, rather than processing each piece of information to form an unbiased opinion, which is kind of hard.

Another reason is to protect their self-esteem. People like to feel good about themselves; any idea or thought that disproves their preconception is unbearable. Therefore, people will look for data that supports their existing beliefs.

Another motive is accuracy. People want to feel that they are intelligent, and information that shows a person’s inaccurate decision-making skills and proves that they’re unintelligent is highly unacceptable.

How Does it Affect Entrepreneurs?

In the world of entrepreneurship, the disgruntled effect of confirmation can be observed in the form of – failing to deliver exact customer requirements, overestimating the extent to which others accept their belief systems, refusing to challenge core assumptions, and neglecting to search for unintended consequences. 

Though entrepreneurs are extremely ambitious people and intensely focused on their goal, they may still get vulnerable to the adverse effects of confirmation bias, leading them to avoid facts that go against their existing beliefs in the areas such as

  1. Investment in a start-up.
  2. Identifying the real competitors of the start-up
  3. Methodically and rigorously analyzing what the competition is doing and how it may affect the start-up.
  4. Understanding what the company’s current and prospective customers need and want (it is usually not what one originally thinks), 
  5. Estimating the resources needed by the company to achieve its stated goals.
  6. Forming new assumptions based on previously analyzed data.

Entrepreneurs need to become rational, logical, and unbiased while making decisions. That’s where they’ll be able to serve better.

Ways To Get Rid Of Confirmation Bias For Entrepreneurs

It is quite a tough task to think above the normal level; it requires advanced level thought processing which can be expected from entrepreneurs.

Though challenges are unlimited, it is worth giving a try to expand the dimensions of our brains and adopt a solution-oriented attitude rather than a problem-focused one.

Here’s how it can be achieved :                                                                  

  1. Looking for fewer competitors rather than more because it increases the viability of the start-up.
  2. Never underestimate the capabilities of competitors because stronger competitors will make business more difficult for the entrepreneur. 
  3. Make sure that the company’s product is fully addressing the needs of the customer because otherwise, the start-up can be in a weaker position in the marketplace.
  4. Looking for fewer resources rather than more because it generally makes raising money easier.
  5. While making an investment decision, entrepreneurs should consider all the existing information and then take the final decision.
  6. A simple mindset shift from ‘I’ to ‘them’ can also create a huge difference

Entrepreneurs need to be cognizant of the danger of operating under the influence of confirmation bias and devise ways to diminish the negative effects of that cognitive error.

Wrap Up

We are all biased to some extent. It is part of being human. But confirmation bias often prevents us from growing and making positive changes in our lives. 

The lesson is that people see what they want to see and tend to disregard evidence that does not support their preconception and are limited by their perceptions and life experiences that can lead to limited access.

Understanding that those differences exist and being able to consider the world from other’s viewpoints is an indispensable part of overcoming confirmation bias.

Kim Hvidkjaer

Kim Hvidkjaer

I’m a father, author, speaker as well as multi-disciplinary serial entrepreneur and investor. I started my first company at age 19, and have built and invested in companies in innumerable industries.

Share via
Copy link
Powered by Social Snap