Investor Connect Podcast

Pseudo-certainty Effect

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

The pseudocertainty effect is defined by Wikipedia as the tendency to make risk-averse choices if the expected outcome is positive, but make risk-seeking choices to avoid negative outcomes.

As the startup finds success, the founder becomes more risk-averse because something at stake can be lost.

For startups that are flailing, risk-taking becomes the norm with all projects.

To overcome the pseudo-certainty effect, consider the following:

Maintain awareness of the pseudo-certainty effect and how it can shift your risk-taking based on the current status of the startup.

Probability assessment is not a natural skill most people have.

It’s best to analyze the outcome of a proposed project by looking at other startups and their track record with projects such as generating leads and closing sales.

Assess the probability of the outcome based on actual evidence.

Take calculated risks that don’t put your startup in danger of going out of business.

Avoid the ‘go for broke’ plan unless you have solid evidence that it will work.

If things are going well, then know you can take more risks.

 

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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Direct download: PseudoCertainty_Effect.mp3
Category:general -- posted at: 5:00am CST

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