Persist or let it go: a study of entrepreneurial decision making

[katzgrau]

Well, as an entrepreneur who is 10 years into a venture where most of my mentors thought my time was better spent on whatever was hot at the time (big data?) I can say that the perception of rationality is, like all things really, very subjective.

I see something and they don't. I think I'm right and they think they're right. But I see what I see, and I want to go for it. I might end up being wrong, but ultimately the journey to that particular place is one of the sincerest forms of self expression I've found, and I can't do that as easily if I too heavily depend on the eyes of others.

[mathgladiator]

> ultimately the journey to that particular place is one of the sincerest forms of self expression I've found

This hits me hard, and thank you for expressing it.

I'm currently building a strange SaaS which brings me joy. I have no customers and a handful of people that have tried it out. I promote it here on HN every chance I get as I am shameless. It's called Adama ( https://www.adama-platform.com/ ) and it started as a way to build online board games.

Now, I have no idea how to market it, and I'm still developing it on variety of fronts. My focus is super diluted and chaotic, and I try to reign it only to discover more shiny things.

The true beauty of life is that there no right way to experience it. When viewed through the lens of an artist, much is subjective. Who is to say my idea is bad? Well, yeah, it is full of silliness, but that's the fun of it. Perhaps, I am wasting my life, but what then is the point of life?

I've come to believe that faith (which I sorely lack in a spiritual sense) is an important part of being human. I have faith that Adama is a great way for me to spend my time, and I'm currently trying to embrace the creative side of life.

[Beldin]

Indeed, a key point is the definition of rationality. You can argue that everyone acts rational: they make choices based on some internal logic that makes sense to them at the time of decision-making. Whether that is the flip of a coin (Twoface) or even what seems most fun and chaotic to them at that moment (Joker).

As far as I know, the fact that the logic used needn't be consistent was already known from psychology (people can provide a motivation for their choices relying on arguments that cannot possibly have actually factored in to their decision-making process).

So that also applies to entrepreneurs, apparently.

[Pearse]

I really appreciate this comment, thanks for sharing

[adtac]

there's a saying in trading: never lose money being right

[colechristensen]

What? This seems to be biased towards success, you're only a rational entrepreneur if you end up being successful, and undertaking a venture without a positive expected value is irrational.

Something like telling a person that went to Las Vegas, did some gambling, had a good time, and lost money that they're irrational and enjoyed their vacation wrong.

[ttul]

Being an entrepreneur means watching your college friends be more successful than you in all the ways society expects us to be successful… likely for a very long time. Your parents will ask why you haven’t yet bought a house or why you have no retirement savings. Partners will question if you’ll ever be rich despite all the sacrifices.

If the process of entrepreneurism wasn’t so deeply satisfying to those of us who need to pursue it, nobody would ever do this. It doesn’t pencil mathematically.

[kodah]

Personally, in my thirties, I don't believe most people are rational in any consistent way. I think people that are perceived as rational tend to have good filtering and pushback mechanisms available to them, which also entails cultivating a friend-group that will provide those things without judgement and elevate you for the outcomes rather than the minutiae in between.

[readme]

also in my thirties and i am convinced humans are vulnerable more than most people are willing to admit

i believe given the right circumstances a healthy adult could be made to believe complete lies

where have I seen this in history....

[voxl]

Funny, also in my thirties, I view almost-everyone as almost-always rational. The issue is instead in the analysis, which leaves out externalities or associated risks that the "specification of rationality" doesn't take into account. I've really never encountered a person who made an irrational decision, just one where I didn't fully understand the total calculus going on in their head.

[nicholast]

You can't evaluate rationality in context of small number of samples of a fat tailed distribution with wide uncertainty bands. Besides, startups can be a kind of success even in failure based on opportunities that arise as a result.

[SnowHill9902]

How do you define rational?

[md224]

I really dislike the concept of "rationality", or at the very least the way it gets used. I'm sure there are cases where everyone would agree that someone is behaving irrationally, but a lot of the time the label of "irrational" hides assumptions about value and tolerance for risk.

If an entrepreneur decides to prioritize certain factors over others, who's to say that's "irrational"? Is there an objectively correct way to run a business? I just find the whole idea so tiresome.

[Zondartul]

"Rational" doesn't mean correct, it only means "logical". For example, a neural net for discriminating between cats and dogs is, in general irrational - and yet it does so better than anything based on pure symbolic logic.

Humans are inherently irrational. We try to emulate rational behavior because a logic gives us certainity and lets us feel secure about the outcomes, but we are physically incapable of acting in a logical way for several reasons. We don't have enough data to make a fully justified decision in every situation, and if we did, it would still cost too much energy for our meat brains to actually compute those decisions.

So we approximate rational behavior, making statistical guesses. With enough data (experience), those guesses are good. Other times, your guesses are bad. Sometimes you have barely any data at all and are forced to choose between several options that all carry risks, so you go with your instinct. Is it rational? No, but it might have been the least bad choice, as in real-world, real-time situations, failure to make any choice whatsoever is itself a choice, and usually a bad one.

ps: I come from the AI field so I have no idea how any of this relates to economics.

[whatshisface]

There are objective standards for rationality, although we rarely have enough information to evaluate other people according to them. One example of an objective standard is whether or not all of the things you say have a fifty-fifty chance of happening, taken together, do indeed happen half the time. Another objective standard is whether or not you change your stated goals after the fact to make yourself feel more successful.

There are no end of objectively irrational behaviors, although we rarely have enough insight into other people's lives to identify them, or the clarity of mind, accuracy of memory and commitment to reflection to see them in ourselves.

[spamizbad]

Surprised entrepreneurs prize this so much. I feel like being irrational is a necessary ingredient to starting a successful business. The rational don’t bother trying or give up too quickly.

[cato_the_elder]

Descartes put it well: "Good sense is, of all things among men, the most equally distributed; for every one thinks himself so abundantly provided with it, that those even who are the most difficult to satisfy in everything else, do not usually desire a larger measure of this quality than they already possess." [1]

Entrepreneurs are no exception.

However, I don't think entrepreneurs have a reputation of being infallibly rational. Scientists are much closer to having that kind of status, so I think studying their irrationality would be more interesting.

[1]: https://www.goodreads.com/quotes/1013067-good-sense-is-of-al...

[atty]

I don’t think the general public sees entrepreneurs as inherently rational, but many entrepreneurs, especially Silicon Valley types, certainly think that of themselves.

Edit: typo

[nthypes]

I don't think the study says anything particularly surprising. It's well known that people are often not as rational as they think they are, and this is especially true of entrepreneurs. They are often so confident in their own abilities and judgment that they fail to see when they are making mistakes. This can lead to them making poor decisions and ultimately to the failure of their businesses.

[montefischer]

Agreed. The American cultural conception of entrepreneurship includes delusion, failure, unethical behavior (recent TV series come to mind).

Scientists and possibly medical professionals are still intuitively treated as rational and correct. Just think about how people shorting consensus medical or scientific opinion are treated in popular media / society compared to those criticizing entrepreneurs and capitalists.

[robonerd]

The best anybody can aspire to is being rational some of the time; no human is rational all of the time. Anybody who thinks they're rational all the time is only demonstrating just how irrational they are, by believing something so irrational about themselves.

[MaysonL]

One of my favorite t-shirts has the motto: "I'm not delusional. I'm an entrepreneur."

From the gapingvoid group.

https://www.gapingvoid.com/?s=I%27m+not+delusional

[dang]

URL changed from https://oa.mg/blog/persist-or-give-up/, which points to this.

I've also changed the title in an attempt to avoid the shallow-generic style of comment which this thread has unfortunately filled up with. (Submitted title was "Study shows entrepreneurs who see themselves as rational, aren’t always rational".) The paper's own title isn't likely to lead to any better discussion, since we all know the answer already, or assume we do.

[aaaaaaaaata]

> since we all know the answer already, or assume we do

Heh.

Have you ever decided to (co?)found any startups, dang?

[wardedVibe]

I mean, the whole point of entrepreneurship is to focus on the upside and have protection from the personal risk of ruin, so it's not surprising that it would distort their thinking generally.

> entrepreneurs create a decision rule comprising a limited set of factors (e.g., the potential for growth) and selectively focus on these factors while paying less attention to and/or ignoring others (e.g., risk of going into default, period of underperformance).

[Geee]

It's quite interesting that economy and economic progress doesn't require rationality, i.e intelligence. Just like in evolution, randomness, copying of successful strategies and survival of the fittest are needed for economic progress. Whatever ends up happening is always post-rational, because everything that is rational survives.

[rilezg]

Everyone is rational based on their understanding of the world, but no one has perfect understanding of everything.

[friedman23]

Paradoxically, you can't be a human and be rational and consider yourself to be rational. You need to work within the limits of the human mind and body. Depending on the circumstances of your body your bias, impulses, and ability to rationalize things changes completely.

[Jensson]

A rational interpretation of the question "are you rational?" is if you are rational relative to other humans, not that you are a theoretically perfect rational being. Same thing as how "are you tall?" means relative to humans, if you answer "I'm not tall, a skyscraper is tall! No human is tall!" then you didn't understand the question.

[Jensson]

> Contrary to expectations, we find that self-proclaimed highly rational entrepreneurs do not (always) behave rationally

Not sure what they thought, did they expect that every entrepreneur who says they are highly rational actually are highly rational?

[otikik]

I would bet that applies to most humans (who see themselves as rational)

[lkrubner]

I apologize if this counts as a shameless plug, but entrepreneurs who are self-destructive has been my main theme for several years now. I wrote a fairly popular book about one particular case, which I think illustrates the overall problem. "How To Destroy A Tech Startup In Three Easy Steps" is a detailed look at how a particular entrepreneur, with a great idea, managed to sabotage themselves:

https://www.amazon.com/Destroy-Tech-Startup-Easy-Steps/dp/09...

[daenz]

If you give us an example from your writing that relates to the thread topic, it will seem less of a plug and build more good will :)

[giantg2]

Are there any studies showing any group of professionals is rational?

We even end up labeling the most rational people as having some sort of disorder...

[nanidin]

I captured this on my whiteboard as “Be open minded to the fact that you’re not always open minded.”

[nanidin]

Or also, from George Bernard Shaw, "The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."

Rational & reasonable are relative.