Dealing with entrepreneurial mind tricks

The mindset of entrepeneurs is unique. Nobel prize winning psychologist Daniel Kahneman told me he considers them “less loss-averse and more optimistic than other people (…) a small and rather atypical minority.”
This can render startup founders distinctly suited to get you to buy into their dream. Whether as a potential investor, client or employee.
Keep you guards up! Entrepeneurs, like other salespeople, can deploy countless subtle mindtricks to get you to “Yes”. A number of these are set out in Kahneman’s book “Thinking Fast and Slow”.
Ready for a test of a few of the most common types?

Maybe he’s not an entrepreneurial winner
“Look at our founder’s track record! His prior successful exit means he’s bound to strike gold again”
Behold the halo effect. Our mind is often overconfident in the labelling of people. A single positive achievement can lead us to brand someone a “winner”.
Let’s think a bit slower here. A successful exit does not give someone the Midas touch. The initial endeavour would have inevitable been helped by a high degree of luck. And the specific set of industry and market circumstances prevalent at the time are unlikely to be replicable.
A track record helps, but don’t believe the founder’s myth.

Nice customer story, but is it a profit-making reality?
“Our target client for our home-cleaning app is Peter, a 20-something year old single man. He works as an accountant, is quite introvert, enjoys video games and takeaways and lives in an apartment.”
Vivid illustrations can be very appealing. You can picture them clearly, which makes them seem more likely to be true. You start to buy into the overall storyline of the startup founder.
Congruency does not been profitability however. Are there enough Peters out there to form a viable market? And do they really dislike cleaning their own home or struggle to find cleaners? Would they be drawn to your solution?

It may be repeated ad nauseum, but that doesn’t make it true
“The hairdressing-space is in need of disruption!
The barbershop industry is outdated
It’s time for a new challenger to hairdressers”
Repetition drives a message home. Rehash a statement throughout a presentation and it starts to sink into people’s subconscious. Soon it will no longer be challenged.
Mind such mantra techniques! These isolated claims remain unproven assertion. What statistics are there to give it them a solid footing?

A stated valuation need not be the starting point
“We are valuing our business at $10m post money. So your $100k investment will get you 1% of the share capital. Interested?”
In negotiations the first person to reveal a number has a psychological advantage. It forces their counterpart to recalibrate his or her thinking. In this case, you may have had $2m as an opening gambit. However the $10m makes this seem overly greedy, potentially forcing you to start negotiations at $4m or higher.
Be careful of such re-benchmarking. This $10m figure is an aspiration, not grounded by hard, sizeable investments.
If you consider the proposal outlandish you may just have to refuse to seriously negotiate until it is withdrawn. Or walk away.

Yes, this may give you a big fear of missing out. But you should be more afraid of a fear of getting carried away — by entrepreneurial optimism.

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