It takes entrepreneurial spirit to develop a major project such as a location-based leisure facility (LBL). One essential component of a successful entrepreneur is ego, that strong sense of self. However, ego is a double-edged sword. Too much becomes hubris or arrogance, which is the sure path to irrational business decisions and failure. Too little ego, and the confidence isn't there to take on the project risk in the first place and to continue to pursue it through setbacks. Ego can be a success driver or a project killer, or both. The successful entrepreneur is one who has the ability to take intelligent risks by benefiting from his/her ego's strengths while mitigating its weaknesses.
The nature of the ego can cause an entrepreneur to fall victim to a number of biases. One is known as confirmation bias or self-serving bias. When you make a decision, it may be tentative at first, but soon you look for all the reasons it is a brilliant move -- and ignore all the factors that suggest otherwise.
Psychological research shows that our desires, our decisions, have a powerful influence on the way we interpret information, even when we are trying our darnedest to be objective and impartial. We are motivated to confirm the decision we have already made. Without being aware we're doing it, we critically scrutinize and then discount facts that are contrary to the conclusions we want to reach or confirm. By the same token, we uncritically embrace evidence that supports our conclusions. Being unaware of our skewed information processing, we conclude our judgments are free from bias.
With self-serving bias, different people supplied with the same information reach different conclusions, ones that favor their own interests. In other words, self-serving bias distorts how people interpret information.
The nature of entrepreneurs' egos can lead to another bias we will call collective bias, which can manifest itself in two ways.
The bottom line of either scenario is that everyone on the project team, whether consultants or insiders in the company, is rooting for something they believe in, and that unconsciously blinds them to the critical judgment skills that are really needed.
New research by Drew Weston, a professor of psychology at Emory University bears out that people will ignore any fact that contradicts what they want to believe. His research shows that most of the time, people make decisions based upon bias, not fact. In the scenarios used in the study, the strength or weakness of the evidence turned out to be immaterial about 80% of the time. In other words, we believe what we want, facts be damned.
Our company regularly sees examples of hubristic, self-destructive ego and the bias that accompanies it. We are often approached by LBL entrepreneurs who are so convinced that their projects are the greatest thing since sliced bread, that they "just know it will succeed." Quiet frankly, most of the projects are poorly conceived, or are clones of demonstrated industry roadkill, that they are guaranteed to be flops. It takes us only a few minutes in talking to these entrepreneurs to determine if they have gone over the edge of no return with their blind exuberance. For those who have, we have learned that there is no sense in trying to help them, as it will only be a waste of their money and our time. We can only hope, for their benefit, that they will be unsuccessful in getting project funding.
Successful LBL developers have an understanding of how their sense of self, their ego, affects their decisions, and they surround themselves with independent people and consultants. They listen to them and find the balance between their vision and reality, not letting self-serving bias lead them down the wrong development path.
Additional reading: The perils of selection bias in LBE development