Israeli Presidential Conference - Entrepreneurs and Irrationality

Are Entrepreneurs Confusing Passion With Irrationality? Thoughts from the Israeli Presidential Conference

Entrepreneurs need to be honest with themselves to succeed.

I had the distinct pleasure of attending the 5th Annual Israeli Presidential Conference today as a member of the press and blogging community. For reference, let it be known that Israelis refer to female bloggers as a “bloggerit” which, when pronounced with a fantastic Israeli accent, comes out sounding like “blog-air-eat.”

President Bill Clinton Receiving Israel's Medal of Distinction from Israeli President Shimon Peres

President Bill Clinton Receiving Israel’s Medal of Distinction from Israeli President Shimon Peres

Today was a whirlwind of introductions beginning with titles like “his Excellency,” although these speakers really did earn that title – honestly. Tony Blair offered an inspiring discussion on leadership. We sat on the edges of our seats while Bill Clinton graciously accepted Israel’s top honor (complete with requisite medal) and admitted that he failed Rwandans during his term. All the women in the audience held their collective breath when Israel’s rising political star and Minister of Finance, Yair Lapid (have you seen a picture of this man?) poignantly stated that the difference between successful societies and unsuccessful societies is simply the ability to embrace change. And he did so in flawless English to boot. Israeli President Shimon Peres identified democracy as “not just the right to be equal, but the equal right to be different”. Well, knock me over with a feather – I was just blown away.

The highlight of the day for me, however, was not Billy, Yair, Shimon or Tony. It was Dan Ariely who rocked my world. I’ll readily admit, even at the risk of self-deprecation, that I didn’t know who he was until today. I had every intention of attending Dr. Ruth’s session (who turns down an opportunity to tune in to a famous 85-year-old sexologist?) My aunt, a 77-year-old-mover and shaker in her own right, insisted that Dan was a better option for me. She dragged me away from Dr. Ruth’s growing line of hopeful attendees and steered me toward “Conference Room B” where Dan was about to go on. Apparently, Dan is a widely known and respected behavioral economist and published author who researches honesty (and dishonesty) and rationality (and irrationality). He studies the gap and balance between two opposing forces inside each of us: Egoutility (the propensity to behave well and be good) and the intense and attractive desire to benefit from cheating and lying; He finds that the way we reconcile these two permanently opposing forces is by deciding to “just cheat a little” and then rationalize this behavior to ourselves.

The rationalization part is what got me. Dan explained that often, there exists an incentive to view the world or a particular situation in a certain way. Once that incentive exists (and the incentive is often that rationalizing negative behavior becomes easier or more natural) it is effortless to see the world or situation in that way. My interpretation:

• Everybody in my community/workplace says that the group of people over there is dangerous/bad/to be avoided
• Gossip in my community is frowned upon
• I enjoy gossiping, but I don’t want to be ostracized
• I will gossip about/treat negatively that group of people, since it is acceptable
• My mind grows to accept that that particular group of people really IS dangerous/bad/to be avoided

Since there exists a social incentive for me to form a genuine opinion that the group in question is bad, and this incentive allows me to rationalize my own erroneous behavior (gossip and the targeting of a group as negative) it behooves me to continue to foster both my own belief and that of my community. In short, I benefit from tricking myself.

Holy social commentary, Batman!

But what, you ask, does this have to do with irrational entrepreneurs? “I’m not irrational”, you insist! Sure. Dan fielded some questions from the audience, and here is a shining example of what his studies have to do with folks like you (and me) who are passionate about their startups:

I work with many entrepreneurs in their early innovation stage and am always intrigued by the strong (irrational) attachment they develop to their idea, often leading to their being blind to reality and to wasting time and money. How quickly do we get irrationally attached to our ideas? Is it based on elapsed time or on specific actions we take (such as presenting the idea to others)? What can be done to cure this?

Dan’s Answer-
The problem, of course, is not just with entrepreneurs. From time to time we all experience someone in a meeting who says something random, and not particularly smart, but then insists that we follow up on his or her brilliant suggestion.

A few years ago, Daniel Mochon, Mike Norton and I conducted experiments about what we called “the IKEA effect”: As the instructions to build something become more challenging and complex, we love even more what we have created. We also showed that this effect takes place rather quickly. In perhaps the most interesting and irrational part of the whole story, we found out that we also mistakenly think other people will share in our excitement over our inferior creations.

What can we do about this? We could try to create an environment where ownership is less powerful or less associated with particular individuals. But if we manage to reduce or eliminate the feeling of ownership, are we also eliminating commitment and motivation? Maybe we should try to increase this sort of proprietary attachment. (And by the way, now that I have finished, I love my answer and think that it is very insightful.)

Proof! You and I are irrational at times, especially when we get worked up about our fledgling enterprises.

The takeaway is weighing “irrational” passion as an entrepreneurial liability versus the advantages of such investment and commitment – is it really worthwhile to be as attached (read: obsessed?) as we are? I say: resoundingly YES. There are decided detriments to throwing yourself into your business – not only those discussed by Dan Ariely. You cannot, however, steal second base while keeping your foot on first – Be irrational. Be inventive. Be passionate – it’s the only way to excel.

Today, Bill Clinton inspired me to examine society. Tony Blair motivated me to assess leadership. But Danny Boy – he called upon me to peer internally. Insistence on self-scrutiny and contemplation – now THAT’S what a call a worthwhile session for an entrepreneur.


hillarySubmitted by Hilary