I remember a magazine cover. Two men I came to know through WiseWire stood back to back, arms crossed. Their firm backed business to business internet companies, and at one point they had asked whether I might join them. I said no. I was enamored with intelligent agents, and I wanted to build that, not invest in it. I looked at that cover and thought one thing. I should have joined them.
Woulda, coulda, shoulda. Every founder knows that voice. For a few months, their holding company model looked like the smartest idea on Wall Street. Then 2000 arrived. Their firm fell with the market, and it fell hard. They built something real, and they kept building after the crash. This is not a story about their mistakes. It is a story about mine, or the one I thought I had made.
Every founder has a road not taken. Mine had a magazine cover.
Hindsight bias has pernicious effects on the evaluations of decision makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad.
It was not my first road not taken.
Before we sold Galt, I went to my board with a bigger idea. NETworth already served stock quotes on the web. I proposed that we become an online broker-dealer. Let people trade, not just look at quotes. The board said no. We would need licenses, and we did not have them. In hindsight, I could have held on and become ETrade before ETrade. That is how early we were.
There are a lot of ifs in a story like that, and you can second-guess yourself forever. I try not to. The sale was right for where we stood on the arc and for what we could see at the time. Both roads look brilliant in a snapshot. Neither snapshot tells you what the full road would have cost.
What the road not taken taught me.
- A cover is a snapshot
- It captures a point on a curve. It says nothing about where the curve goes next.
- Capital rides the curve
- Money rides the same adoption curve that products do. Their bet on the destination was right. The timing, like ours at Internet Venture Works, ran ahead of the market.
- Judge the decision
- Not only the outcome. That applies to the roads you skip as much as the roads you take.
The third lesson is the one that matters most. The choice I made was right for me. I am an operator. I wanted to be in the arena. WiseWire put me in a room with Geoffrey Moore. Lycos acquired WiseWire, and I ran a unit of more than twenty-five products and about 350 people that grew revenue from $75 million to $135 million. The crash that humbled the cover humbled me too, at Internet Venture Works. Operating did not protect me from the curve. It taught me to read it.
Daniel Kahneman explains why the cover hit so hard. Hindsight bias makes us grade a decision by its result. A skipped road is the easiest place to fall into it, because you only see its outcome, never the full picture you decided on. So you grade yourself against a snapshot twice. Once when it looks brilliant, and again when it falls.
Debrief a road you skipped.
- Name the roadWrite down one opportunity you turned down that still pulls at you.
- Rebuild what you knewWhat did you know at the time, what could you reasonably have known, and what did you value?
- Find the curveWhere was that opportunity on the adoption curve when you saw it? Where was it a few years later?
- Grade the decision firstThen the outcome. If the decision was sound for who you are, let the snapshot go.
Quick answers.
How do you stop regretting an opportunity you turned down?
Rob Frasca’s approach: a magazine cover or a headline is a snapshot, not a verdict. Judge the decision by what you knew and valued at the time, not only by how the other road looked at one moment.
What is hindsight bias?
Daniel Kahneman describes hindsight bias as judging a decision by whether its outcome was good or bad rather than whether the process was sound. Rob Frasca applies it to roads not taken as well as roads taken.
Sources.
- Rob Frasca, The Creator’s Journey (forthcoming), Chapter VIII, Capital and the Exit.
- Daniel Kahneman, Thinking, Fast and Slow (Farrar, Straus and Giroux, 2011). Source