Think twice: Transforming instincts into informed business decisions

As a startup coach and business Angelina, I’ve seen countless entrepreneurs grapple with decision-making.

In my private life I always told my son that " I don't know what to do" is not a choice. I told him and keep telling him today that "making decisions is part of growing up and every day for the rest of our lives we have to make thousands of decisions a day. Sometimes we take weak decisions and sometimes we make great decisions. Important is to own our decisions no matter how good or bad and next time make better ones. "

In the startup life mastering decision-making is crucial for entrepreneurial success. Because your decisions as a founder affect not only yourself but your co-counders, employees, investors, customers and sometimes the whole ecosystem.

One book that has profoundly shaped my understanding of this process is @Daniel Kahneman's "Thinking, Fast and Slow".

Kahneman's insights into human cognition offer invaluable lessons for rational decision-making in business.

What is Fast thinking vs. Slow thinking

Kahneman introduces us to two modes of thinking:

Fast Thinking (System 1)- This is our intuitive, automatic, and quick way of thinking. It’s driven by emotions and instincts. While it’s efficient, it can lead to errors and biases.

Examples of things system 1 can do:

• instantly identifying a friend in a crowd
• solve 5+5=?
• determine that an object is at a greater distance than another
• localize the source of a specific sound
• complete the phrase "bread and ..."
• display disgust when seeing a gruesome image
• read text on a billboard
• drive a car on an empty road
• understand simple sentences
• quickly sensing that someone is angry from their facial expression

Slow Thinking (System 2) This is our deliberate, analytical, and logical way of thinking. It’s slower and requires more effort, but it’s crucial for making well-thought-out decisions.

Examples of things system 2 can do:

• solve 25x58=?
• look for the woman with the grey hair in the crowd
• direct your attention towards someone at a loud party
• prepare yourself to start a pitch
• try to recognize a sound/ a song
• keep a faster-than-normal walking rate
• determine the appropriateness of a particular behaviour in a social setting
• count the number of the letter O's in a paragraph
• give someone your telephone number
• park into a very tight parking space
• determine the price/quality ratio of two 3D printers
• figure out how to play a new musical instrument
• figure out how to say the correct "Servus" in German (holiday in Austria)
• develop a business plan for your startup, considering market research, financial projections, and competitive analysis
• decide whether to pivot a business model after evaluating all relevant data and potential outcomes
• analyze a situation involving conflicting moral principles to determine the best course of action

Which system would you trust for big decisions?

In the context of entrepreneurship, understanding when to engage each system can be the difference between success and failure.

Cognitive traps and Kahneman’s eight questions

Kahneman outlines these critical questions that expose the cognitive traps we fall into daily. Let’s explore these questions, each accompanied by an example from the world of startups and entrepreneurship:

Q1. Am I thinking fast or slow?

Fast thinking can lead to quick, intuitive decisions, but it may also result in oversights and biases. Slow thinking, on the other hand, involves careful analysis and rational thought.

A startup founder might quickly be impressed by a person eloquence (as a potential co-founder) based on a good first impression (fast thinking). However, a more deliberate approach (slow thinking) would involve assessing the potential co-founder’s skills, experience, and cultural fit over time.

Q2. Am I too stressed to think clearly?

Stress can cloud judgment and lead to poor decision-making. Recognizing stress levels and taking steps to manage them is crucial for making sound decisions.

When facing investor pressure, a founder might feel stressed and make hasty decisions about pivoting the product. Taking a step back, practicing stress management techniques, and consulting with the team can lead to a more balanced decision.

Q3. Is this a reversible decision?

Some choices are set in stone and some are written with pencil. Understanding whether a decision can be undone can reduce the fear of making the wrong choice and allow for more bold and innovative thinking.

Choosing a marketing strategy is often a reversible decision. If a particular campaign doesn’t work, the startup can adjust and try a different approach. On the other hand, threatening you co-founder CTO is irreversible.

Q4. What is the quality of the evidence?

Assessing the reliability and validity of the information before making a decision ensures that choices are based on solid evidence rather than assumptions or incomplete data.

Before deciding to fire an employee, a founder should gather comprehensive performance data and seek feedback from colleagues to ensure the decision is justified and not based on a single incident or biased perspective.

Q5. What would I think of this decision one year later?

Considering the long-term impact of a decision can provide perspective and prevent short-sighted choices.

When deciding whether to take on a large investment with stringent terms, a founder should consider how this decision will affect the company’s autonomy and direction a year from now. Will the benefits outweigh the potential constraints?

Q6. What would I think of it if it was someone else’s decision?

Removing oneself from the decision-making process and evaluating it objectively can offer clarity and reduce emotional bias.

If another startup founder decided to relocate their headquarters to a different city, how would you evaluate that decision? This perspective can help assess your own plans to move the company for better market opportunities.

Q7. What would I advise my best friend to do in such a situation?

Offering advice to a friend often involves a mix of empathy and rationality, which can be a useful perspective to adopt for oneself.

If a friend were struggling with whether to part ways with a co-founder due to conflicting visions, you might advise them to have an open, honest conversation and explore all options before making a final decision. Applying this advice to your own situation can lead to a more thoughtful approach.

Q8. What are the opposing arguments?

Considering the counterarguments to your decision can highlight potential pitfalls and strengthen your reasoning.

When deciding to expand into a new market, list the reasons against it, such as higher costs, unfamiliar regulatory environments, and increased competition. This can help balance the enthusiasm and ensure a well-rounded decision.

Applying these insights

Understanding and applying these questions can drastically improve decision-making processes in entrepreneurship:

• Slow down-Engage your slow thinking to analyze complex decisions, especially those with long-term consequences.
• Seek diverse perspectives-Mitigate biases by consulting others and considering different viewpoints.
• Evaluate evidence- Base your decisions on reliable data and thorough analysis rather than intuition alone.

Embrace both fast and slow thinking, and you'll make more rational, informed, and ultimately successful business decisions.

#DecisionMaking #Entrepreneurship #BusinessStrategy #CognitiveBiases #DareCareShare

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PS: Hi, I'm Asetila Koestinger von Sonnenland ?? and I'm a startup coach and business Angelina.

I talk and post about #impact #AI #scaling #startups #WomenWhoStartup #ProblemSolutionFit #ProductMarketFit #investmentreadiness #pitching #renewableenergy and other startup topics & advice every month.

I share all what I've learned from working with over 200 startups per year around the world. I?dream of a society where startup businesses are half-led by women.

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