Against the StartUp Grain: The Pitfalls of Trusting Your Gut

July 09, 2023 12 mins read

In God we trust. All others must bring data.

W. Edwards Deming, Statistician

Dear Reader,

For startup founders, the phrase “trust your gut” has been romanticized to the point of becoming a cliché. You, the maverick founder, throwing caution to the wind and relying on your gut to make the next big move. You, the oracle of your startup, who always has the answer, even when no one else knows if it’s true. You, the fearless leader, who got us all to this point, is it time to question the assumption that only you know the answer?

Imagine a doctor, hearing your symptoms, has a gut feeling you’ve ripped your ACL, should they skip the MRI and jump straight into surgery? Of course not, they test their (falsifiable) hypothesis. This is you. Have all the gut feelings you want, but treat them as hypotheses that need to be validated.

LAST WEEK:

Vision or Delusion: The Thin Line Between Optimism and Fraud – Where does visionary optimism end and outright fraud begin? When does ‘fake it till you make it’ turn into deception? Can startup pressures justify blurring the boundaries?

LETS GET INTO IT:

A startup is a manifestation of your gut. Your belief without question that this is a “thing” and people will care. But as you start to scale (or not scale), this gut instinct starts causing inconsistency in your decision-making.

The ‘gut’ that drives ideation and the ‘gut’ that should guide scaling are different. As you transition from being a founder to a CEO, data needs a seat at the table. Scaling a startup is about the thrill of growth as well as the discipline of management.

Contrarian much? Sometimes, you’ve got to chuck all the opinions out the window, bolt like there’s no tomorrow, and trust your gut because creating that initial benchmark, that first pulse of data, often matters more than any meticulous plan that’s yet to take shape. This is not saying data driven is analysis paralysis, it’s saying this is guide, strike a balance.

This week is for you, the founder who is dictating features out of thin air, prioritizing engineering requirements without defined outcomes, the one who can’t describe the user conversion funnel or the most and least used features of their software, the one who is not engaging directly with your users, the one who is adding more and more hoping that something will stick, this message is for you.

My gut says this is you, but my instinct says I likely just hit a nerve and need to soften this blow.

TedX: “3 Ways to Make Better Decisions – By Thinking Like a Computer.” It offers an interesting perspective on balancing human intuition and data-driven decision-making.

Book: “Blink: The Power of Thinking Without Thinking” by Malcolm Gladwell: This book discusses the concept of “thin-slicing” or making quick decisions based on limited information. Gladwell argues that intuition can sometimes lead to better decisions than a thorough analysis.

The Gut vs. Instinct vs. Intuition Dilemma

Differentiating between gut, instinct, and intuition can be a challenging exercise. Let’s break it down.

Gut is the innate part of our decision-making process based on our previous experiences and learnings. As founders, when we face a complex problem, our gut often suggests a solution that worked in a similar past situation or follows the same pattern.

Instinct, is our primitive, survival-driven response designed to protect us from perceived danger or take advantage of immediate opportunities. When we sense a threat or a chance, our instinct kicks in, pushing us towards fight or flight. For founders, instincts can kick in during high-pressure moments resulting in decisions not necessarily beneficial for the long run.

Intuition, refers to the process where our brain makes connections at a subconscious level, leading to a feeling or ‘hunch’ about a situation. As founders, this might mean having a ‘feeling’ about a potential market opportunity or a team decision that’s hard to explain logically but seems ‘right.’

Here is my cheat sentence:

“When you face an unknown path, your gut may suggest a direction based on past experiences, your instinct might push you to avoid it due to perceived danger, but your intuition will subtly hint if something feels ‘off’ or ‘right’ about the path based on subconscious patterns.”

In your journey, understand the difference, but mixing them up or relying on one to the exclusion of the others can skew decision-making.

Balancing Intuition and Data in Decision-Making

I imagine intuition inspires product features especially if you are still the product owner. Are you determining the feature priority based on data, based on what you believe to be a foundational base requirement, based on the 10x feature you think will change everything.

An idea rarely practices, ensure each Jira ticket has a clear expectation or hypothesis and objective. This way, it forces you (likely for the first time) to explain what you expect out the feature (outcome) in quantitive terms, and the gift of letting your engineers understand the ‘why’ behind their work.

One tactic is the 90-day open ticket rule. After a feature’s release, keep its corresponding Jira ticket open for 90 days. This allows you to assess if the feature met the initial expectation, based on real usage data. Did it do the thing we expected. If not, it sparks a review for improvement or even removal, ensuring each feature contributes meaningfully to your product, no point maintaining a feature that doesn’t drive value.. is there?

Just root more of your decisions in reality and put an objective in front of them.

Your Gut, Your Worst Enemy

It’s a popular narrative to follow our gut feelings as they are assumed to be the most honest reflection of our inner selves. Your gut can often be misleading, especially when decisions require an understanding of context, implications, and trade-offs.

Confirmation Bias: Your gut can lead you to seek out information that confirms your existing beliefs and ignore contradicting evidence. In startups, this could mean focusing on positive feedback while ignoring critical data pointing out flaws in your product or strategy.

Overconfidence: Trusting your gut can breed overconfidence. Believing that your gut feelings are always right can lead to risky decisions without adequate validation or consideration of alternative perspectives.

Emotional Decision Making: Gut feelings are deeply tied to emotions. Decisions made under the influence of strong emotions might not be the most rational or beneficial for your startup. It’s essential to separate feelings from facts when making critical decisions.

Hindsight Bias: Your gut can make you fall prey to hindsight bias, a tendency to believe that past events were predictable or obvious when they weren’t. This can lead to false confidence in your ability to predict future outcomes based on gut feelings.

Selective Memory: This is a tricky one. You likely remember all the times your gut was right, but do you remember all the times it was wrong? The danger with gut decisions is that they’re often rewarded with credit but rarely penalized for mistakes.

Wondering how your gut feelings can play tricks on you? Try the Iowa Gambling Task to see a firsthand experience. Developed by neuroscientists, this online game puts your decision-making to the test in a scenario that mimics real-life uncertainties.

Thinking Like a Scientist

Startups, by their nature, are experiments in marketplaces. Can my product or service offering gain traction and become economically viable. You need to approach decision-making as a scientist would.

The first thing a scientist does when faced with a problem is formulate a hypothesis. They don’t just guess or trust their gut. They create an educated prediction that can be tested. This could be as simple as saying, “I believe implementing a new feature will increase user engagement on our platform.”

Next, a scientist devises an experiment to test this hypothesis. In the case of you, this could be prototyping the new feature and introducing it to a subset of users.

The key to scientific thinking is reliance on data and observation. If the new feature does increase engagement, you have evidence to support your hypothesis. If it doesn’t, your hypothesis was incorrect, and you need to understand why. For you, this is analytics and software like FullStory (free) combined with feedback and community watching.

Failed experiments are not setbacks; they are opportunities to learn and refine your hypothesis. Embrace failure as much as success, because both are rich in data and lessons.

The Lean Startup Method vs. The Scientific Approach

While both the Lean Startup method and the scientific approach emphasize iterative testing and learning, they differ in their nature and scope. The Lean Startup method prioritizes speed and agility, often pushing for quick, minimal viable products (MVPs) to test the market waters.

The scientific approach, on the other hand, is more methodical. It’s about being thorough, questioning assumptions, and always looking for concrete evidence to back decisions. It’s not about rushing to conclusions; it’s about making sure your conclusions are based on sound data. In StartUp lingo this could be RAT.

These two approaches are not mutually exclusive. You can rapidly prototype and release MVPs (Lean Startup), while also meticulously collecting and analyzing data to make informed decisions (Scientific Approach (RAT)).

Real-life Examples: Gut, Strategy, and Leadership Interplay

When a company makes a decision that goes against the market and all available data, is it just a display of poor or great leadership? If they didn’t use data, then they must have relied on a collective “gut feeling,” which can also be construed as flawed strategy and leadership. What happens if it works, what happens if it doesn’t?

Blackberry: Made the strategic error of deciding not to make BBM cross-platform. They believed that keeping BBM exclusive would help maintain hardware sales, but data and market research would have indicated the rise of cross-platform messaging apps like WhatsApp and the shift towards smartphones and app ecosystems.

Steve Jobs: Often cited as an example of a successful leader who trusted his gut. He famously said, “You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.” He relied on his instincts to predict what customers didn’t even know they wanted yet, which led to groundbreaking products like the iPhone.

Decca Records & The Beatles: In 1962, Decca Records made one of the biggest blunders in music history. After auditioning The Beatles, executive Dick Rowe decided not to sign them, reportedly saying, “Guitar groups are on the way out.” His gut instinct couldn’t have been more wrong.

Blockbuster & Netflix: In the early 2000s, Blockbuster had the opportunity to buy Netflix for $50 million. The leadership at Blockbuster, didn’t believe that the internet would become the primary medium for watching movies and turned down the offer. Blockbuster also believed they were in the “rewind” business!

Airbnb: Their business model was predicated on the assumption that people would be willing to rent out their homes to strangers. They validated this assumption with an MVP during a large conference in San Francisco, proving the power of validating “gut” instincts with real-world data.

Kodak: Despite inventing the digital camera, Kodak chose to stick with film — a decision driven by a gut instinct that eventually did not align with the rapid digitization of the industry.

Fred Smith, FedEx: While studying at Yale, Fred Smith wrote a paper for an economics class outlining the idea for an overnight delivery service. The professor supposedly told him the concept wouldn’t work, but Smith trusted his gut and went on to found FedEx. (Adam Sandler has the same story!)

Amazon: Recognized the potential in cloud computing early on and made use of data on underutilized internal data centers to create the now hugely successful Amazon Web Services.

Google Glass: Assumed that wearable tech would be widely adopted but did not adequately validate this assumption. As a result, the product was discontinued due to privacy, design, and cost issues.

It’s a stretch to attribute all these decisions solely to gut instinct, they are a combination of gut, strategy, and leadership. These three elements are intertwined in any decision-making process. What we can infer, is that gut instincts, for better or worse, likely played some part.

Finally…

Your gut is an excellent compass when you’re exploring the unknown. It helps in charting out the course, in uncovering new possibilities. But as a founder, you have to be more than just an explorer. You have to be a scientist, a strategist, a manager. And these roles require more than just gut feelings; they require data, facts, and rational thinking.

It’s not about suppressing your gut feelings. It’s about complementing them with evidence, and giving them the right weight in your decision-making process. So, the next time you’re faced with a big decision, don’t just trust your gut. Challenge it, test it, and balance it with data.

Remember that even as we warn against over-reliance on the gut, we’re not dismissing it. The gut has its place in decision-making, especially when it comes to creativity, innovation, and exploring new paths. But it doesn’t need to be the sole driver.

Until next Sunday, challenge the status quo, and give people the benefit of the doubt.

— James

(LinkedIn | Twitter | Tiktok)

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