As founders and investors, one of the most important skills we can develop is improving our decision-making. When we spend time in this area, the return on investment can be exponential, even hyperbolic, because we are investing not only in our own development but also in the compounding effects that better decisions may have in our business over the long run.
One of the main challenges that I see most often is the illusion of immediacy.
This can be characterized as the proverbial knee-jerk reaction to short-term fluctuations within our ventures — a tendency to view temporary issues through a magnifying glass, amplifying their severity and prompting immediate, often drastic, actions.
Imagine it’s a down month for revenue. Instead of the usual $100k, you’ve pulled in $70k. Alarm bells start ringing. The immediate thought?
“We’re hemorrhaging money; cuts need to be made, and fast!”
A downward spiral ensues. Perhaps it’s firing the marketing agency, or making a flurry of new tasks to “increase productivity”. Even senior leadership may find themselves in the crosshairs of the irate CEO.
But here’s the catch: the business isn’t on the brink of collapse. The company has enough money in the bank to ride out these fluctuations—perhaps for years.
Sometimes the numbers aren’t down at all – they are just not growing at the same rate as they used to. I can’t tell you how many conversations I’ve had with founders who are down in the dumps because their once-sparkling year-over-year growth numbers are lower but not negative.
Slowdowns in revenue are hardly the only situation that gets the best of us. The illusion of immediacy is as pervasive as it is insidious – with good reason.
At heart, founders are problem solvers. And when we identify a problem we want to solve it now.
I’ll be the first to admit that I’ve been guilty of this lately. I’ve had my foot on the gas for months, building my business diligently and investing in myself. I found myself stressing out about getting things done before my trip last week when my wife gave me a much-needed reality check. She gently reminded me that all of the pressure I was feeling was actually self-imposed. I was creating urgency, and with it stress, because I want things to move faster.
But the reality is, I’m deeply proud of what I’ve created over the past year. And even more importantly, there is no actual financial pressure (or any other kind) that requires things to move any faster than they are. If I don’t finish all of my to-do list before a weekend ski trip, there is almost zero impact or long-term consequence – other than the ones in my head.
The first thing needed in these situations is a healthy dose of perspective.
Admittedly, it can be hard to slow down when the walls seem to be closing in.
But what is really at play in this scenario?
What’s happening is a reflection of a deeper psychological pattern we fall into, influenced by a cocktail of cognitive biases and logical fallacies:
- Recency Bias makes us overvalue the latest data, overshadowing the bigger, often more stable, picture.
- Negativity Bias leads us to fixate on the bad news, overshadowing achievements and progress.
- Overgeneralization has us projecting the future with the lens of the present, a single dip projecting endless decline.
- Post Hoc Ergo Propter Hoc (after the fact, therefore because of the fact) traps us in false causality; a bad month is suddenly the result of broken marketing, a failing sales team, etc
- Short-termism sees us sacrificing long-term vision on the altar of immediate relief.
These biases skew our perception, creating a false urgency and a distorted view of our situation.
In confronting any challenge, the first step is to pause and ask, “Is this true?”
Is the business genuinely teetering on the edge, or is this a temporary dip in the long and winding road of entrepreneurship?
The next step is to zoom out—look at the data over a more extended period.
One of the biggest mistakes we make is focusing on monthly data. For many decisions, this is simply too small of a sample size.
What’s the trend over the last 3 months? The last three years? You’ll often find that these dips are part of business’s natural ebb and flow, mere blips on the radar in the grand scheme.
Remember the distribution of outcomes? The longer we’re in the game, the broader the range of outcomes we’ll encounter. It’s the nature of business—a landscape marked by variance and unpredictability. How would we handle decision-making differently if we came to expect the variability as inevitable?
Finally, it’s about creating a set of if/then rules—a contingency framework for when short-term data points towards a longer-term trend. For instance, “If revenue dips below X for Y consecutive months, then we will evaluate cost-saving measures or diversification strategies.”
This is where the real gold lies. My business partner and I used to say, “There are no emergencies in business,” a nod to our fighter pilot days flying combat missions. If we can use data coupled with the appropriate sample size to make better decisions, the results will start to speak for themselves.
This approach isn’t about ignoring problems but responding to them with a measured strategic mindset. It’s about distinguishing between the noise and the signal, ensuring that our actions are data-driven and aligned with our long-term vision.
The benefit? When we slow down and ask if this problem is really a problem at all, we often find that we are already on the right track – all we need to do is zoom out and stay the course.
May your sample size be ever-increasing,
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