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The Irrationality of Choice when Thinking Fast and Slow

Think fastThink fast (Photo credit: freddie boy)

As marketers, we often rely more on instinct and perceptions of experience than rational thought. Marketers justify this type of decision making by convincing ourselves that when predicting the future, it's difficult to use the past or historical fact. Analysts on the other hand use historical fact and data as the only basis for decision making.  They introduce a bias that often causes organizations to not see what is happening around them.  This is how companies such as Folger's Coffee miss dramatic changes in a market, such as the coffee revolution sparked by a company like Starbucks.

In the book "Thinking Fast and Slow" , Daniel Kehneman demonstrates how bias influences decision making and how our minds are subject to systematic errors. As we all understand, but rarely consider, intuitive preferences consistently violate the rules of rationale choice. For example, if you like Ford cars, are you more likely to purchase Ford Stock, even if the stock isn't the best rational choice?  

The notion of "Thinking Fast and Slow" refers to two systems in the mind, system 1 and 2. System 1 operates quickly without voluntary control, while system 2 are subject to the amount of concentration and reasoning you apply to a problem.  For example, the author points our that system 2 applies to what we think of ourselves, while system 1 is the snap judgement we make when viewing others. Another example is the bias to act on an immediate emotional reaction, even when you are manipulated, instead of assuming or understanding that in fact you were manipulated into a decision, resulting in an error of judgement.

"We can  be blind to the obvious, and we can be also blind to our blindness"

The book also explores the two dimensions of ourselves, the experiencing self, and the remembering self, which as noted by the writer, "do not have the same interests." For example, "what makes the experiencing self happy, may not make the remembering self happy."  Another important point is that we are much better at recognizing mistakes in others, than spotting errors of judgement made by ourselves.

"Thinking Fast and Slow " is helpful in developing a higher degree of self awareness and promises to have a positive direct effect on your ability to formulate and execute marketing programs. 


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The Startup Game

The_Startup_Game Anyone that is interested in learning about venture capital and the life of one of its most revered participants, William H. Draper III,  would be well served by spending some time with his book, "The Startup Game: Inside the Partnership between Venture Capitalists and Entrepreneurs "  Part biography and part how to succeed in venture capital, Mr. Draper tells his story with insight, enthusiasm and passion.

The books provides helpful advice for any entrepreneur interested in working with venture capitalists. Aside from a behind the scenes look at the industry, Mr. Draper goes even further to provide peals of wisdom one could only hear from someone with the depth of experience that comes from funding and participating in some of the great venture startups of our day such as Skype, Hotmail, OpenTable and more. Mr. Draper goes out of his way to illustrate through example how ethics and successful business practices can co-exist to achieve outstanding results.

This book is highly recommended reading for any entrepreneur.  Thanks to Mr. Draper for sharing an inspiring look behind the curtain of venture capital and DFJ.

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Buying is Personal

The icon used by Apple to represent Podcasting.Image via Wikipedia

I highly recommend taking a few minutes to listen to the podcast by Walter Edgar and his guest, author Gene Bedell.  In the interview, Mr Bedell discusses his books Three Steps to Yes and Millionaire in the Mirror (my favorite career guide).

The author discusses the axiom that "all buyers are liars." He points out that they are not really liars, they just cannot articulate what they are really looking for vs. what they think they are looking for. As an example, when looking for a house, buyers often describe what they want based on situational needs (# of rooms, bathrooms, kitchen etc.), when in fact most real estate decisions are based on personal needs (what will my mother in law think, how will my friends see the purchase, does it help my self esteem).  The physical attributes of the home are situational needs, when in fact, the buyers is seeking to fulfill multiple personal needs.

Mr. Bedell also discusses the need for identifying benefits that are meaningful to the prospect.  He tells the story of his son who refused to brush his teeth in an act of defiance.  Gene would discuss the health benefits of dental care to no avail.  However, when he mentioned to his son that he had bad breath, and that girls in school would make fun of him and run away, his son raced to the toothbrush.

In his review of his other book,"Millionaires in the Mirror", Mr. Bedell discusses what makes some people more successful than others.  The book is a study of the top 1% of earners and the characteristics that they have in common.  He points out that success is not necessarily related to your college or SAT score, but to your ability to manage your career, career focus, and the ability to know when to step out of your comfort zone.

The full podcast can be found here on Walter Edgar's Journal.


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Escape from Cubicle Nation

Cover of "Escape from Cubicle Nation: Fro...Cover via Amazon

Escape from Cubicle Nation: From Corporate Prisoner to Thriving Entrepreneur is the title of a book by Pamela Slim, a former trainer for large corporations that was inspired to write a book to help corporate executives make the transition from cubicle to their own business.  The book was inspired by her observation that often the most successful employees within corporations are often the unhappiest, with many harboring deeply hidden aspirations of starting their own business.

The source of all this unhappiness was often the inability to meaningfully contribute to the companies they worked for.  The author contends that as organizations fight for survival, they continually change.  The byproduct of these frequent changes is a constant feeling that your position is not secure and work you completed does not matter.

The book then goes on to help those thinking of "escaping" through the many factors that need to be considered, from the reaction of your spouse to the reaction of your parents.  The book even provides advice of replacing medical insurance and other corporate perks.

Written in the spirit of the best selling business book, The 4-Hour Workweek by Timothy Ferris, these books together provide a viable blueprint and last minute reality check for anyone thinking of starting a business.

The book aptly ends with some words by Guy Kawasaki, from his book The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything .

"The truth is that no one really knows if he is an entrepreneur until he becomes one - and sometimes not even then.  There really is only one question you should ask yourself before starting any new venture:

Do I want to make meaning?

Meaning is not about money, power or prestige.  It's not even about creating a fun place to work.  Among the meanings of "meaning" are to:

  • Make the world a better place
  • Increase the quality of life
  • Right a terrible wrong
  • Prevent the end of something good"
I couldn't agree more and recommend this book to anyone thinking of becoming an entrepreneur.

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