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Don't Let Misperceptions Guide Your Entrepreneurial Decisions

Dec 26, 2007
You want to create a successful business. What's the right approach? Many choose to invest time and money in what seems hot right now. That can be an unfortunate decision. Why?

Everyone is hobbled by false perceptions of opportunities and threats that lead to wasteful and inappropriate efforts. Millions establish internet based businesses and few make significant income because they believe they can easily make a fortune with little effort. Why?

They read and hear a lot about the exceptions who do well in this challenging medium. Yet tens of millions shun profitable franchise operations that would earn them vastly larger incomes than they enjoy now.


They read and hear a lot about a few unethical franchise operators who offer poor opportunities.

Do you believe everything you read in the newspaper and see on television? You're in trouble if you do.

Organizations do even worse. Why? The false perceptions of each individual are multiplied as it usually takes agreement to move forward. Fewer and less appropriate opportunities are pursued as a result.

What can you do? Assume that all of your beliefs are based on misperceptions until you've checked them out.

Apply Sophisticated Thinking

In his wonderful book, The Unschooled Mind (Basic Books, 1991), cognitive psychologist Professor Howard Gardner argues that people usually think at three different levels. Gardner defines the five-year-old's mind as the first level.

Five-year-olds usually live in a world where others take care of them and keep them safe from harm. That belief persists when most people become adults and prevents many from becoming independent, fully functioning adults. Overprotection after age five makes matters worse. A

nother common example of the five-year-old mind is that confident people falsely believe that they are superior in every way to others. Ask any roomful of five-year-olds if they are terrific at something and almost all will agree.

The second level of thinking develops when training, usually in high school and college, gives teens and young adults a grasp of sophisticated concepts that are counterintuitive to the five-year-old's thought process. Here's the problem: The student memorizes the concepts long enough to pass the examination.

But Gardner argues that relatively few adults reach the third level of thinking where they can apply the sophisticated concepts to real-life problems. In the absence of that faculty, almost everyone reverts to the five-year-old's misconceptions for making decisions.

The person who can apply the principles learned in school to a real-life situation becomes a disciplinary expert. But those effectively working minds are few and far between in most organizations.

Think of what could be accomplished if you consciously shed your five-year-old's misconceptions, applied sophisticated adult reasoning to expert knowledge, and questioned common assumptions of the prevailing five-year-old mind.

Round Out Your View

When only an experiment will do, cross-check your idea in other ways to get a better sense of what you are about to try.

Consider Columbus. While some feared sailing west across the Atlantic believing they would fall off the edge of the Earth, Columbus knew better. He had made a point of studying the early Viking explorations of North America. In fact, in 1477, 15 years before heading toward the Caribbean, Columbus visited Iceland to learn more about the northern "islands" across the Atlantic.

I'll Get Right on It

Even if people attempt to apply sophisticated thinking, they will still jump to conclusions too often. If service was slow the last two times you went to a given store, you may decide this store will always offer poor service and don't go back. Statistically, two experiences do not constitute a trend. It's possible that the manager was away on vacation on both occasions and the rest of the employees took it easy.

The executives of one award-winning multibillion-dollar manufacturer were clearly intelligent, well educated, and widely admired for their decisions. Ever curious, these managers wanted to measure the quality of their decisions. They knew good decision making has to reflect solid statistically based data, and they wondered what statisticians would say about their decisions.

Statisticians were assigned to follow the executives around for six months to watch them in action. Almost without exception the executives treated random events as representing what was typically occurring in the business. Executives were constantly trying to eliminate these few random variations in performance.

All this scurrying around kept the executives from having time to work on more promising opportunities for gain. Despite learning this profound insight, the organization faltered by continuing to mistake the actual trends. The lesson: Be sure you are focusing on the areas where action will do the most good.

This example also shows how wide the gap can be between perceptions of management quality and actual effectiveness, another example of misperceptions. You have probably noticed the frequency by which "widely admired" companies rapidly fall from grace as performance plummets. Misperceptions have pulled them away from good opportunities.

How can you check on the real potential of your entrepreneurial decisions?
About the Author
Donald Mitchell is coauthor of six books including The 2,000 Percent Squared Solution, The 2,000 Percent Solution, and The 2,000 Percent Solution Workbook. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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