Musings And Dialogue On Entrepreneurs And Decision Making (Part 1)

A bit of a new angle on this blog, this post is related to the early-stages of a research effort by my wife (who is a professor of marketing at UCLA's business school) with respect to entrepreneurs and decision-making. Though I am no scholar in the area of entrepreneurial decision-making, I understand that the area of overconfidence in entrepreneurs is a well-studied and documented bias, but that there may be other biases and decision-making characteristics of entrepreneurs that could be better understood.

The basic idea is that if you can better understand biases and faults in decision-making processes of entrepreneurs that one can improve the decision-making of entrepreneurs through training.

With that as backdrop, I'd welcome perspectives on a series of questions that I'll be posting here.

The first questions are, "How much of being a (successful) entrepreneur is innate personal characteristics (things like risk taking or creativity), and how much is a learned ability to manage behaviors (like ability to be decisive or to manage time well)?"

Here's my off-the-cuff perspective (as a person that does not consider himself an entrepreneur but a person closely involved with entrepreneurial ventures and approaches):

  • Nature – There's some things that entrepreneurs are born with. These things include dispositional characteristics like being a risk-taker, having a need for independence, having drive for success, being creative, having strong intuition, having persistence, and having stamina.
  • Nuture – There's some things that entrepreneurs can learn. These things include learning how to better communicate, how to network effectively, how to make decisions, and how to recognize proxy markets and adapt learnings. Potentially nuturable areas are learning empathy, sales, and trade skills relevant to intellectual property development (e.g., engineering, software design).

What are your thoughts and experiences?

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7 Replies to “Musings And Dialogue On Entrepreneurs And Decision Making (Part 1)”

  1. My perspective comes from 20+ years of franchise consulting, for start-ups to Fortune 500 companies. It may be useful to distinguish between true entrepreneurs who create a self-sustaining business and self-employed individuals whose busienss depends on their continuous personal time contribution. Within the latter group, I find four main categories: 1) The “almost-entrepreneur” who just cannot let go of day-to-day micro-managing; 2) The practitioner of a profession; 3) The well-prepared MBA type with little desire to create something new and become a true entreprenuer; 3) The “tell-me-how-to-do-it-type” who simply “buys himself a job.” What drives each of these vary greatly. Finally, I would venture that many employed executives have incentive contracts and operate more as entrepreneurs than many of those who are commonly referred to as entreprenuers.

  2. These a great comments. I agree that segmentation of the market is key.
    Setting that aside for a moment, on number 4, are you referring to those that “buy-in” by putting in capital and getting something like equity and a job?
    The incentive contracts item (e.g., stock options) is also an interesting angle, potentially from both non-entrepreneurial and entrepreneurial environments.

  3. But what is the point of this discussion, in relation to our topic? I feel as an entrepreneur, that Steve has nailed my weakness, great confidence in my ability to ‘sell the vision’ but weakness in my ability to realistically estimate what it takes to pull it off.
    Thus I have employed mitigation strategies to compensate. I have partnered with a COO who has successfully built hundreds of systems over his 35 year career as a technology manager. More importantly, my co-founder has a naturally cautious and conservative nature, and thus is a good foil to my exuberance.
    For me Steve the trick is to partner and hire around your weaknesses, and try your best to identify them for what they are. Thus if your investigations uncover more weaknesses, I would be glad to learn about them.
    I believe I have another one to nominate: Entrepreneurs are for the most part quite driven, and the sucsessfull ones are used to ‘pulling off things which appear to be difficult.’ Thus, I propose that they have low tolerance for failures in others, and a lack of will and hard work from those around them. This in turn causes friction with the more mundane folks that they work with, who feel that expectations are being set too high. I at least find that I am constantly having to adjust my expectations of others who can not think as fast, work as hard as I do. This is something I have learned to do with increasing grace over time, but it was definitely experience, not nurture witch brought me to the point where I in fact can ‘suffer fools’ and by ‘suffering them’ find often that they are much less foolish than I thought.

  4. There are a bunch of great comments in here. There seem to be a number of threads with respect to entrepreneurs and hypothesized decision-making biases or tendencies:
    1) Overconfidence leads to variety of problems, e.g.
    – underestimating plans
    – underestimating other people
    – getting involved in areas where the entrepreneur does not have experience
    – potentially getting preyed on by quick-fix “gurus”
    – foot-dragging
    2) Some overconfidence is posturing and is not subject to decision-making biases
    3) Entrepreneurs may have a management disposition toward being less tolerant of failures in others
    – can require adjusting management style
    – can require adjusting goal setting
    Potential ways of plugging holes for entrepreneurs weakness include:
    – getting a good COO-type to complement the visionary experience
    Probably more to come …

  5. I have removed a number of comments here at request of a commenter who did not give permission for me to reproduce the comments made on the LinkedIn forums which forward linked to this post. My intention was simply to facilitate conversation as there were a number that wanted to participate in the dialogue from here but could not link back to the LinkedIn group discussion. As part of attempting to facilitate conversation and linking to the source, I did not properly seek reproduction of comments to this site whether required by the site or common courtesy.
    My apologies to those affected. I’ll refrain from these practices.

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