Common wisdom says we learn from our mistakes, and nowhere is this supposed to be truer than for experienced entrepreneurs. Countless stories remind us of how great entrepreneurs learned by doing and failing, again and again.
Some of these well-known narratives are actually true, some apocryphal and others pure fiction. Yet all follow a similar storyline: Act One: the entrepreneur’s dream is ignited; Act Two: she achieves early success, but then crashes from bad decisions, judgment errors and maybe a little hubris; Act Three: slow and difficult recovery commences; Act Four: the entrepreneur is reborn smarter, tougher and humbler. Scene closes to triumphal music.
This four-act story happens, but usually out of sequence and with much uncertainty about which act the entrepreneur is living through at any moment. After all, there is no director, no script and, unfortunately, the audience can’t or has little interest in helping you along. When you’re an entrepreneur, you’re on your own to muddle through, making one dumb, damn and avoidable mistake after another. But is that what is actually happening?
In 1956, an article appeared in the scientific journal Psychological Review titled “Rational Choice and the Structure of the Environment.” The author, Dr. Herbert Simon, was a rising star in economics and a professor at Carnegie Tech (Carnegie Mellon University today). Dr. Simon studied decision-making intensively and, specifically, how we actually make (and maybe should make) choices. Most economists before, and many since, his seminal work constructed their economic theories on the elemental concept of “rational” decision-making, where we take in all the available information, weight it, consider all the pluses and minuses and make the best choice. Simon said this is not really how we make choices, because the real world does not permit it, no-way, no-how.
We try to take in all of the available information, with accurate assumptions about its quality, integrity and timeliness. We believe we dispassionately consider it, without all of inherent biases, prejudices and blind spots. We make the best choice, free of the emotion of the moment and properly weighting the data. In fact, Simon believed we live in a chaotic and confusing world seemingly specifically engineered to make human decision-making as difficult as possible. Our ability to choose well (whatever that means) is bounded by time, circumstances and our all-too-human qualities. It is a view that has stood the test of time, which is one reason Simon received a Nobel Prize in Economics for it in 1978.
When a “successful” entrepreneur looks back, she treasures her mistakes as some of the most important lessons in her life. Yet, when the still “unsuccessful” entrepreneur looks back, he sees the wreckage of a litany of bad choices and, with much regret and some emotion, seemingly now knows exactly where, why, when and how he erred. Of course, boards of directors, investors, cofounders and entrepreneurial gadflies are also there to offer schadenfreude-laden post hoc analysis of that “failed” entrepreneur’s poor choices as well. Add to this the libraries of books, doctorates awarded, consulting fees received, speaking engagements made, MBA courses offered and reputations built on a foundation of second-guessing the entrepreneur’s choices.
However, the problem may be less about after-the-fact evaluation of choices made deep in the heat and extreme intensity of the ever-uncertain day-to-day existence of the startup than in defining what went right with those same choices, regardless of how meager the results of those choices may appear to be at any one point in time.
Despite the best efforts of the analysts, management consultants, academics and thought-leaders, entrepreneurial decision-making is and always will be bound in the manner Simon so poignantly described, and to a degree far greater than anyone who has worked for, in or around a startup can possibly consciously know at the time. What is too often called a “bad decision” on reflection may have been for those people who made that choice and/or were actually there helping make it the savviest, smartest and cleverest choice possible at that particular moment.
Lessons learned properly point out problems with decisions, no doubt. But we sometimes forget that tired, eager, distracted, conflicted and emotional humans, just like you and me, made those “losing” choices. Does this mean we cannot judge the wisdom of our past choices? No. Rather, it asks that we view our past choices and those of others with the same extreme humility we asked and expected of those making the choices in the first place.
By Mark DeSantis, CEO of RoadBotics