Week 5: A founder's guide to imperfect decision making
Imperfect decisions can take you further than you think...
Central to the rollercoaster ride of being a founder is the daunting task of decision-making. In today’s newsletter, we dive deeper into the science of decision making, understanding ways you can simplify the task, arrive at a superior outcome with imperfect decisions, and avoid pitfalls along the way!
The science behind decisions
Contrary to what most people think, logic is only a small part of decision making. Psychological and and emotional factors play a bigger role than we would expect, challenging the assumption of traditional economic models. Being an economics enthusiast, I’ve always been interested in understanding how one can make the best decision in the shortest time, and what I’ve discovered from research and speaking to founders across the globe is the following:
Prospect Theory is a big one for founders - it suggests that humans tend to prefer certainties over probabilities. For example, suppose that you have a choice between being given $50, and a 50% chance of winning $100. Most people will take the $50, even though the expected value of the two options is exactly the same. This can play against the benefit of founders, as it psychologically prevents them from taking ‘good risk’ or investing in their business for superior outcomes.
The weight of responsibility can also feel overwhelming for founders - very much like a parent deciding what’s best for their child. The fear of making the wrong decision, of veering off course, can lead to being ‘frozen’ – a state where the fear of making a mistake prevents any decision at all.
So, founders are generally more careful and often base their decisions on past experiences. For founders from humble backgrounds, it can be especially daunting because we’ve seen scarcity and often don’t have comfortable alternatives to fall back on. But…there are ways to come out of this stronger that I’ve tried and tested and would like to share with you today.
Embracing the Unknown: A Fundamental Aspect of Entrepreneurship
A good mentor and friend of mine once told me that…
“You’re not an entrepreneur until you feel comfortable with imperfect decisions”
As someone who’s spent her life perfecting models and PowerPoint presentations in consulting, I initially didn’t understand that - why can’t I just spend more time perfecting my thought process and arriving at the ‘best’ decision?
But when I became a founder, I realised 3 things that completely changed my mindset:
I don’t know everything about my business and customers
What I want to know can’t be discovered in a set period of time. It is a continuous learning process that never ends
Even if I do know everything, I won’t in the next few days/months because things always change
Strategies for Imperfect decision making
So, how can one get comfortable with making imperfect decisions? Well, here are some of the best strategies I’ve picked up over the years from successful entrepreneurs and mentors….
1. Define Your Values
Before diving into decisions, establish the core values that guide your company. Knowing what you stand for provides a solid foundation for decision-making. When faced with uncertainty, refer back to these values to ensure alignment with your vision.
2. Start with Small, Reversible Decisions
You know how they say, "test the waters before you dive in"? Well, same goes for decisions. Especially those little day-to-day choices – dip your toes in and see how it feels. Start with decisions that are uncertain but reversible, like trying out a new software or tweaking your marketing strategy. If it works, awesome! If not, no harm done. You're not stuck with a decision that feels like a bad haircut.
3. [If you have to make a big decision] Break It Down and Have an Off-ramp strategy
Big decisions can be overwhelming, and they do require careful thought. Break them down into smaller, more manageable components. It makes the whole decision-making process more like solving a puzzle. Each piece you conquer gets you closer to conquering the whole thing.
Another really good advice that I got from an entrepreneurial class at Harvard Business School is to always have an ‘off-ramp strategy’ i.e. an exit plan to slowly phase off the outcome of a big decision in case it goes wrong. This helps you prepare yourself mentally for any outcome, and feel comfortable about moving forward with your decision.
3. Gather Data, BUT Trust Your Gut
Information is your ally. Gather relevant data, analyse it, but don't ignore your instincts. Successful founders often rely on a combination of data-driven insights and gut feelings to make informed decisions.
The reason a lot of us do not trust our gut is social conditioning - society has always celebrated masculine traits like assertiveness and speed, instead of reflection. Which is a shame because intuition can often be the turning point in people’s lives - it’s a natural way of processing observations around you, which is actually super helpful as a founder navigating a new business or industry.
Data and logic will always be important, but remember to check your instincts. More often than not, they complement each other and lead you to a better decision.
4. Learn from Mistakes
Imperfect decisions inevitably come with mistakes. But here's the silver lining – they're your secret sauce for growth. Treat them like badges of honour, not like a scarlet letter. Look back at your wins and oops moments. What worked? What didn't? It's like having a personal playbook for decision-making. Learn from it, refine your strategies, and next time, you'll be making decisions like a seasoned pro.
5. Seek Counsel and Mindfulness
You're not alone in this journey. Surround yourself with mentors, advisors, and a supportive network. Seeking input from others can provide valuable perspectives and insights that may not have crossed your mind. Incorporate mindfulness practices into your routine to stay grounded and focused. A clear, supported mind is better equipped to handle tough decisions.
The Road Less Travelled: Celebrating Bold Choices
As a founder, embracing imperfect decision-making is an integral part of your journey. Each decision, even the ones with mistakes, propels your start up forward. Instead of viewing a difficult decision as a roadblock, see it as a sign that you're treading the path less travelled – the path of innovation and bold choices.
In the end, being a founder is not about eliminating fear but learning to manage it. Remember, every decision is a step towards your ultimate destination, and the journey itself is where the true magic happens.
Prompt of the week: Make a small reversible decision
One of the best practices I’ve had as an early-stage founder is to make small reversible decisions e.g. launch a beta website and test it out with 20 close friends. Identify a reversible decision you can practice making this week, and apply the above strategies. See how that makes you feel, and share your experience in the comments!
Till we meet next Sunday,
-Nareen