Friday, May 24, 2013

System 1 entrepreneurship

I have been engaged in a lot of conversational debate on social media, sometime quite contentious, on the Kahneman model of System 1 and System 2 thinking.  I am sure most of you have a sense of what these are, but just to get us all on the same page: System 1 is an intuitive and associative processes that is based on recognition.  It feels effortless and instinctive.  We are in the middle of an experience and just “know” what to do.  In contrast, System 2 is deliberate and analytical.  It takes cognitive resources, effort, and focused attention. 

The easy debate is when and where System 1 and System 2 type thinking dominates the decision making process.  System 1 is where we usually start out.  In an easy situation, when we are under time pressure, or when experience tells us what decision/response will work to an acceptable level, we do it.  We never need to put forth the effort of System 2.  But when the decision is personally important, we have time to think, and experience fails us, we recruit our deeper cognitive faculties and engage in System 2 thinking.   

But there are a lot of details that remain quite contentious, at least as I have seen in recent debates.  How these two systems really work is hotly debated.  What triggers the shift from one to the other?  Can one be called “better” than the other?  Or more rational?  Generally, these conversations use examples from typical human factors decision making domains such as aerospace, military, and healthcare. But today, I want to move over to the domain of entrepreneurship.  This is an area that human factors professionals don’t often focus on.

As many of you know, I spent many years directing a university entrepreneurship center where I helped faculty, students, and members of the community start businesses based on their science, technology, and design ideas.  As part of this work, I had to study the thought leaders in entrepreneurship and startup management and new venture business strategy.  Many of these experts were quite adamant that they key to success was to use the approach of "ready, shoot, aim".  Better to do something immediately and fix the deficiencies in version 2.  But what they don't say, perhaps because they don’t know about human factors, is that this only works when you have built up enough of an information arsenal that "ready" has an imbedded "aim" in it.  These are expert decision makers who can recognize details about the situation without thinking about it.  So they are aiming, they just don’t realize it.  Giving this same advice to novice startups can be fatal.  Since many of the Center’s clients were technical experts but entrepreneurship novices, they needed to “aim.”  The ones that came in with the latest new venture bible tucked under their arms were much more likely to fail.  It was part of my role to convince them that aiming was much more important than their book suggested.

Since then, I have continued to consult in this area so I have seen many attempts by people with great ideas to create a company from nothing except sweat equity and desire.  Some of these founders have some pretty good insights on how to start a company.    But they are often swayed by this “ready, fire, aim” idea.  I think it is perhaps the best value I can add to explain what System 1 thinking is and why they don’t have it in this case.  So we sit down, roll up our sleeves, and do some “aiming.”