I’m so biased about my business

Remember how I told you yesterday about how reasonable and rational I am about the future of my business?

Well, here’s a story about how I ignored that upfront rationality and let overconfidence step in.

Several months ago I was speaking with a peer in the industry. Another entrepreneur who was early on their business journey as well. He asked a pointed question: “How confident are you that your company will make it?” I paused for a minute. “I’m 90% confident this business will be successful,” I replied. The conversation continued on and I didn’t think much of that statement. But the next week when my wife and I reviewed the kill criteria for the business I remembered that statement I made.

Why exactly am I 90% confident this business will work?

So I did some research.

Roughly 80% of new consulting/professional services companies close in their first year in business (According to Bureau of Labor and Statistics). Another 20% close over the next two years. Overall, 50% of businesses fail to make it 5 years in business. What reason do I have to think my business is 90% likely to succeed when 50% fail to make it 5 years? The main reason is overconfidence. Looking honestly at the base rate statistics I should start my confidence of success at around 50%. From there, I could potentially come up with a handful of reasons why I think my business has a better-than-average chance at success. But it’s irrational for me to believe my business is enough of an outlier to warrant a 90% success confidence from me.

So I’m grateful that kill criteria was identified upfront. Otherwise, it’s very likely that my overconfidence bias would have inhibited my ability to make reasonable choices about when/if to close my business.

Overconfidence can be deadly for your decision-making.

- We think we are rational about our decision-making.

- We think we are “data-driven” because we look at a few dashboards.

- We assume our gut experience aligns with reality.

Here’s why this matters.

It’s not about just having data. It’s about having data that removes our biases, integrates with a robust decision making process, and provides a vantage point to assess our progress.

That’s what data means to an organization. If you want to be a high performing data team, start with a reality check on your data team. Focus on what’s real over what you feel.

What problems show up in your team when overconfidence and bias are present?

I’m here,

Sawyer