Behavioural science
tuned into the investment decision
Within any decision lies our human behavioural psychology
Innovations in behavioural science and cognitive psychology,
are gaining acceptance amongst investors.
Behavioural science is used to explore entrepreneurial and leadership styles, and cognitive biases.
Cognitive bias is a natural human ‘shortcut’ way of thinking.
By pattern recognition, it saves time in our decision making. It’s useful.
The aim is to bring that pattern recognition up to our conscious level, so we can run the thought past our intentional logic.
experience, intuition, what worked before,
the next Mark Zuckerberg
Stability bias
resistence to change
Cognitive bias has many forms
Availability heuristic
drawing on immediately available information only
Anecdotal fallacy
relying on a sample size of 1 or 2, and applying the results to everyone
Affiliation bias
familiarity
Anchoring bias
resistence to new information
Implicit egotism
gravitate to people who resemble us
Gender stereotype notions
expecting or assuming notions of behaviour based on gender
Group think
gravitation towards harmony or conformity in the group
Endowment bias
valuing higher the investments we own
other bias rationalise perceptions as 'reality'
Counter with
diversity of thought
I was so surprised at my own bias, I researched where they came from. The curiosity of how, even as a life-long campaigner for equality, some of my own thoughts or reactions are biased. I know when I'm biased, I'm the one missing out on seeing something new. And that's my incentive to re-wire my thinking.
3 cups
Flour
Invest with awareness of factors that derail our objectivity, to get the highest returns, either for yourself or your fund.
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Advise your client, either investor or founder, with awareness on how stereotypes can derail a deal.
2 tbsp.
Salt
1½ cups
Butter
NO blame here, we're all biased, me too.
Find your incentive.
Bias, its how our mind naturally
filters information
We all think we are objective, yet statistically, we are all wrong.
The influence of unconscious 'bias' feels so strongly intuitively right,
that naturally we believe we are objective.
Our unconscious 'bias' is vital to get through our everyday lives,
to filter the vast amount of information we receive every minute of every day.
It's a vital part of our survival. When there's danger, we can't wait to assess all the information available, we need to react immediately. It's a process we do without even thinking about it. Before we cross a road we filter information to quickly assess whether its safe.
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That same, quick filter and extrapolation process,
is vital when crossing the road,
though not helpful
when it can have unintentional unprofitable outcomes.
“Flip it to test it"
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If you think something you are saying or doing may be subject to your unconscious bias rather than your conscious values, flip it and see if you feel the same way.
Kristen Pressner, Global Head Human Resources, Roche Diagnostics
Gender stereotype notions
expecting or assuming notions of behaviour based on gender
One step, is to notice things
we may not realise we are doing
To notice where our subtle language, and tone,
reflect unconscious stereotypes that
do not match with our conscious values.
To notice how, these stereotypes play out in our everyday decisions, how they can put limits on our perception of others,
or put limits on ourselves.
Notice the terms we use
Women who pitch tend to be called 'she' or occasionally 'business owner'.
Men were called 'entrepreneur,
innovator, business owner, inventor'.*
'entrepreneur, innovator, inventor, founder,
business owner
The solution
Notice how subtle language can influence your perception of another's competence.
Use the same term for all founders and give yourself the same baseline perception for everyone who pitches.
In a University of Santa Barbara study, business plans were switched male or female names.
​
Under the female name the same plan was rated less competent and received less (hypothetical) investment
When the business plan was
highly innovative, this
bucked gender stereotypes
of women being less bold and risk loving.
The solution ... investors and founders can both 'lean in'.
'Our image of an entrepreneur desperately needs an update - here's how we change it'
by Harley Finkelstein
'50 Ways to Fight Bias gives people the tools to address gender bias head-on ... 50 Ways cards & videos are designed to help men play a meaningful role in identifying and combating bias.' by LeanIn
