Getting Too Specific Can Be A Downfall For Entrepreneurs
This is something that happens to me. I know it happens, but now that I’m aware of what the cognitive bias is maybe I’ll be able to recognize when I’m doing it make things right.
The bias we’re talking about today is the Base Rate Fallacy.
The idea is that some of us tend to look at a specific case and make decisions that we should be making with more general information.
It seems that in some cases we even pay attention to specific information instead of looking at general information when we have both at our disposal. That’s scary for entrepreneurs because you’re always making decisions with the information you have and if you make the wrong decisions it can lead to poor results.
I’ve used golf as an example before here on the blog and I think it fits here. Let’s say you play golf all summer. You do fairly well, but then one day you’re off. You come off the course thinking you’re the worst golfer in the world when in reality you have the general information that says you’re a pretty good player. But instead of focusing on the general you focus on the specific.
Base Rate Fallacy And Business
There are a number of instances when you can get in trouble with the Base Rate Fallacy in business. Let’s say you find a study that shows that if you tweet photos relating to your business five times per day every day of the week that you’ll increase followers by 200%.
But then you tweet one photo and it doesn’t do anything for you. You come to the conclusion that photos will never work for you on Twitter and you give up the strategy.
You saw the general information study. You can see that the strategy works for a number of others, but after seeing one specific example you draw a conclusion that photos won’t work to get you more followers.
Let’s say you find a study that says if you identify your top 100 prospective clients and that you cold call them on a specific schedule for a year that you’ll close 10% of them in that time. But after calling them for a week with the right script and everything you close no sales. You give up and move on.
You have the general information available, but focus on the specific and draw your conclusion.
In business it’s our job to focus on the general information. Great business leaders are good at applying specific information to the big picture and making the best decisions with the information they have. Yes, some go on gut and feel, but many go on the information they have and they try to gather as much information as they can especially general information.
Don’t overlook the general in your business by falling victim to Base Rate Fallacy.