How The Clustering Illusion Can Affect Entrepreneurs

Dayne Shuda
Are you guilty of the Clustering Illusion?

Back in the early ’90s I had a Super Nintendo. My brother and I would play a game called NBA Jam all the time. I think it was also a popular arcade game that was in our local bowling alley. Remember arcade games?

Anyway, there was an interesting feature of the game that falls into today’s topic. If you made two three-point shots in a row the announcer would proclaim, “He’s heating up!”

It was exciting because if you then made a third shot in a row you would be, “On FIRE!”

That meant that you could shoot any shot and you wouldn’t miss until the other person would make a shot. It was a nice feature that made the game fun, but it is also an example of how some of us tend to fall into the trap of Clustering Illusion.

Clustering Illusion

The Clustering Illusion is a cognitive bias that sees some people fall into the trap of getting on fire or going on hot runs or getting a hot hand.

Has that ever happened to you?

I don’t gamble much, but sometimes you play a game and you hit a few wins in a row and you feel like you can’t lose and that you’re on some kind of run.

The same thing occurs in sports. I used to play basketball and you would make a few shots in a row and it would feel like you couldn’t miss if you kept shooting.

I play golf today and you feel like sometimes you’re just on a run that is amazing.

It seems that way, but is it actually happening?

I think what happens is that the odds always work out. Last week I talked about good and bad breaks in life. Things seem to even out over time. You might got on a hot run one week and go on a bad run the next. Or you might just get a mixture.

Clustering Illusion In Business

In business I’ve noticed that I can get caught up in the Clustering Illusion.

It seems like inquiries come in streaks. You’ll have a few quiet days and then you’ll get a bunch on a single day or in a few days in a row.

It’s easy in that moment to think that you’re the best leader in charge of the best business in the world. You feel like you’re on fire.

And the opposite is true as well. When you’re on a bad run you feel like you’re the worst leader in charge of the worst business in the world.

Okay, maybe it’s not that dramatic, but you can have a few swings.

Focusing On The Bigger Picture

The point here is to be aware of what’s happening when you go on a good or bad run. You don’t want to get caught up in what’s happening in the short-term and start making decisions that will negatively affect the future.

You don’t want to get on a good run, take out a loan and bank on that run lasting for years and years as you spend money on things that you maybe don’t need.

And you don’t want to overreact to a bad run either.

I think the best way to go about things is to recognize the big picture. See what’s been happening over time. Then focus on how you can improve over time. Then back things down into daily habits that will help you reach those long-term goals.

With GBW, I like to look at year over year traffic stats for our blog. You get all kinds of swings in traffic day to day, week to week and month to month. But year over year is a pretty good measure of solid growth.

Focus on long-term analytics and always keep a big picture perspective on business.

It’ll keep you sane and successful.

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