Hubris

Hubris is part of the startup operator’s job.

After all, you have to believe something should exist before the market has given you much reason to agree.

If you wait for proof, you never start. The crazy ones are the ones who change the world, as they famously say, and sometimes they are right.

That conviction gets you through rejection, fundraising, and all the days when the evidence is thin. It can also turn dangerous. It can make you stop listening, treat feedback as an attack, believe the normal rules do not apply to you, and turn every assumption into something that feels like a fact.

But hubris is not simple confidence. It is what happens when that heavy conviction disconnects from reality.

The same belief that helped you start the company can make it impossible to see when the company needs to change.

Overprecision

In work with Paul Healy, Don Moore separated three ideas that often get lumped together under overconfidence. Overestimation is thinking you performed better than you did. Overplacement is thinking you performed better than other people. Overprecision is being more certain than your accuracy deserves.

That last one is especially persistent. Ask people for a range they are 90 percent sure contains the right answer to a factual question, such as the length of a river, and their ranges tend to be too narrow. The right answer lands outside them much more often than one time in ten. People know they could be wrong, and they still draw the boundaries too tightly.

A founder’s plan can become a range like that. When it narrows to one outcome, the budget and hiring plan start treating that outcome as inevitable. There is no room left for the other possibilities, in the spreadsheet or in the founder’s head. (In Moore’s terms, I was overprecise about my own company.)

Applause as an Input

Mathew Hayward and Donald Hambrick studied this from another angle, looking at premiums paid in large acquisitions. The premiums CEOs paid grew larger as their companies performed better and as the business press praised them more. They also rose with how much more the CEO was paid than the rest of the team, which the authors used as a measure of self-importance. Hayward and Hambrick interpreted those signals as hubris, and shareholders of the buying companies tended to lose value.

Those were public company CEOs making large, one-time bets. Founders make smaller bets far more often, and the praise can arrive before there is much of a business to evaluate.

The mythology we inherit is full of the maverick founder who ignored every doubter and was proven right. We almost never tell the story of the founder who ignored every doubter and was wrong, even though there are far more of them.

Inside the company, there is usually nobody whose explicit job is to challenge the founder. Early boards are full of people who believed the forecast, and the team was hired by the person who made it.

How Certainty Changes What a Founder Sees

Ann Tenbrunsel and David Messick described a process called ethical fading. Through ordinary self-deception, the ethical side of a decision fades from view, and what remains looks like a routine business call.

But the further that one goes down this path, the easier it becomes to justify. Each decision you make is made in the context of that which came before it.

That’s a slippery slope.

Over time, the question shifts from whether something is right to whether it will work. That is how certainty can make a founder cross a line they would have stopped at earlier and still feel like they are doing the right thing. It is easier when nobody is close enough to ask the uncomfortable question, which is the subject of Isolation.

Keeping Your Confidence Testable

Keep a forecast log. Once a month, write down a handful of predictions about the business with a probability attached. Check them when the date arrives. The point is not to prove you are usually right. It is to learn where your confidence tends to outrun your accuracy.

Objectivity is not a personality trait you either have or do not have. It is a practice. Write down what you believe, what would change your mind, and what actually happened. That gives you something more useful than a vague intention to be honest with yourself.

Outside evidence matters too. A customer who does not renew, a user who stops coming back, a forecast that misses twice. Those are not insults to the vision. They are information about what needs to change.

Use premortems for the big bets. Before committing, imagine that the plan failed and write down the reasons. Revisit those reasons as the work unfolds. A premortem gives doubt a scheduled place in the process instead of letting it arrive only when things have already gone wrong.

Give someone explicit permission to disagree. A board member or senior leader who knows you want the strongest case against the plan will catch things you will not, especially if you thank them when they deliver it.

Write your boundaries down early. What will you not do to make the forecast come true? Which facts will you report exactly as they are, even when they are inconvenient? A short list is easier to honor than a principle you only carry in your head.

And watch what applause does to the next decision. When the press is kind or a round just closed, that is a good time to slow down and check the evidence again.

I still value conviction. I just do not want it to become a closed system. The work is to keep enough structure around it that reality always has a vote.

That is the part I still have to watch in myself. I want to believe the bold version. The difference now is trying to make that belief answer to customers, evidence, and people who are allowed to say no. Reality still gets a vote, and it has to be allowed to change the plan.

Further reading

• “When Business Gets Messy” in ShowUp