WE MAKE MOST DECISIONS EMOTIONALLY
Why is do so many business opportunities fail? There must be some way to predict which opportunities will succeed and which ones will fail, right?
When we pursue an opportunity, whether it is our next big startup idea, an attractive acquisition or a new product idea that may change the world, we get emotionally tied to our opportunity. As neuroscientist Antonio Damasio discovered, we make business decisions emotionally, not rationally or logically. 4 Damasio explains his findings:
Often we feel emotions instinctively…gut feeling “marks” the chosen alternative, coloring it with a certain emotional hue so that it is more salient than the other alternatives…As psychologists and behavioral economists have shown, the average person’s day-to-day reasoning is often quite faulty. The human mind is terrible at calculating probabilities and a vivid, dramatic image can dominate someone’s mental landscape. For instance, a person may be quite scared of flying after picturing a plane full of screaming passengers dropping 6,000 feet out of the sky and exploding. Yet the same person may be quite comfortable traveling by car. The irony is that the odds of dying in a plane crash are far lower than the odds of dying on the freeway.
Pursuing an opportunity is like that exuberant emotional rush of being in love and overlooking the other person’s flaws that are obvious to everyone else. That blindness leads to a very real problem. Our emotional attachment to our opportunities means we tend to not see the potential issues and disregard the likely downsides.
Every venture capitalist has seen with entrepreneurs during “pitch” meetings. The entrepreneur is often so wildly enthusiastic about his or her idea that they can't seem to rationally listen to any potential risks. The other side of the table is just as susceptible though. Investors will often go with their “gut” because they really like the entrepreneur, the management team, or the deal itself. There is a saying that acquirers and investors tend to “cave to close” and give up key terms just to get a deal done. It's all human nature. We are emotionally wed to our pursuits and we don’t want logic and reasoning to get in the way.