Startup Funding Espresso – Outcome Bias

Outcome Bias

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Outcome bias is a cognitive bias defined by Wikipedia as the tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.

Investors judge an investment based on the outcome alone and often disregard the circumstances under which it was made.

Results can come from factors other than the original decision.

To overcome the outcome bias, an investor should take notes about the information available and the decision process at the time of investment.  

The investor can later review the information available to determine the quality of the investment decision.

By separating the decision-making process from the results one can distinguish between good or bad decisions from good or bad results.

There are many exogenous factors in startup investing. 

Investors should gather relevant information and make careful decisions about each investment. 

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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