Motivated reasoning is a major cause of startup failure

September 21, 2023

Reading Time:

Views: 172

One common human problem is our inability to evolve. We develop identities and then we work hard to protect our identities.

I’m someone who doesn’t like balloons. I’m someone who is a straight talker. I’m someone who doesn’t quit, no matter what. I’m someone who is always right. I’m someone who knows everything and is never wrong.

These identities, entirely of our own making, then run our lives. We then build our reasoning to serve our identities. When we do that, it is called motivated reasoning.

Motivated reasoning is one of the many manifestations of a lack of cognitive flexibility. It is not so much about our inability to think, rather it is our unwillingness to think differently.

Simply put, motivated reasoning is a phenomenon where we use our reasoning to support positions that we already agree with or oppose positions that we already disagree with regardless of evidence.

We bend evidence and come up with arguments, how silly they may be, to support our positions. It is an ostrich mindset where we assume if we ignore some evidence, everything will fall into its place. Motivated reasoning is one of the ultimate examples of cognitive inflexibility. In almost all instances, it can be pretty costly.

Let me offer you a manifestation of motivated reasoning. For instance, you are a startup founder. You are building an on-demand pet food delivery service in Dhaka. But you know that the number of pet owners in Dhaka is slim. It is not a big market. Moreover, most pet owners live in Gulshan and Banani areas where there are many nearby pet food shops. And pet owners generally prefer to shop offline. Existing market evidence suggests that a pet food marketplace can at best be a small-scale business. That too will take time to build. But you are invested in your idea so much that you refuse to see the alternative facts. You reason that more people will start owning pets. That people now order more things online and they will do so for pet food as well and so on. If someone points at the limited market size you reason them out that they are being pessimistic.

Let me give you another example. You are building a digital payment product for small businesses. You see excellent penetration. You explain there are millions of small businesses and it is very possible for you to build a meaningful business in the vertical. But you face difficulty finding paying customers. You face various regulatory challenges. But you are still hopeful. You think it might be easier to build a second product to help you find your long lusted growth lever. But all evidence suggests premature expansion is bad for startups. It creates many challenges. Moreover, while a new vertical may appear exciting, it is unlikely to be any easier to build a second business when your first product continues to struggle. If you want to pivot, you should make a hard pivot instead of trying too many things at once. But you press forward despite the evidence contrary to your reasoning.

Motivated reasoning is everywhere. We always opt for our preferred views even when they are contrary to the evidence.

Motivated reasoning can be very costly for startups. Our inability to see reality as it is can negatively affect our ability to make sound decisions. In many instances, motivated reasoning is simply wishful thinking. We expect things to be a certain way and operate from that expectation. But reality can be complex. And the reality is often nonlinear. In startups, motivated reasoning plays out in a number of ways.

Your growth has slowed down, and you’re struggling to find new growth levers. Instead of accepting the fact that you are suffering from limited growth, you explain your problem away. Instead of working on your core product challenges, you start building a second product or focus on PR or similar initiatives.

You have started with an idea but you need help to get it to work. Your advisors/mentors want you to pivot to a new idea. But you consider your idea to be very good. You think people just don’t get it. You offer bizarre explanations for your idea and why you should keep doing it.

Motivated reasoning manifests in many different ways. Some of the common manifestations are:

Confirmation bias. As the term suggests we seek out information that confirms our existing beliefs and ignore information that contradicts them. As we discussed earlier, as a founder you might only seek out market data that supports your idea and ignore evidence that suggests otherwise.

Sunk cost fallacy: We have already invested a significant amount of resources and we can’t back down now, even if the prospects of success are low. For instance, I have seen companies continue to pour money into a failing product instead of pivoting to a new idea.

Overconfidence bias: This is something we often do. We ignore critical feedback from others because we are convinced that our idea is the best. We tend to be more confident in our own abilities and the validity of our beliefs even if the evidence suggests otherwise.

Hindsight bias: We tend to believe that we were right about certain events after they have already occurred. You might believe that your idea was always going to be a success, even though you initially had doubts.

All these are common examples of motivated reasoning in startup scenarios. And in most instances, if you leave these problems unresolved they can sink your company.

Now the solution to motivated reasoning is cognitive flexibility.

Cognitive flexibility as the term suggests is our ability to think flexibly and adopt new ideas when existing ideas are not working. It is our ability to think differently, abandon ideas that don’t work, and then evolve our thinking based on new information.

Achieving cognitive flexibility is not only necessary for making better decisions, but it is also essential for learning. These skills are interconnected. Your decision-making ability will improve only when you constantly learn new things.

While the benefits of cognitive flexibility are well established, achieving cognitive flexibility is not easy. And motivated reasoning is hard to discard.

There are many reasons why we use motivated reasoning. In a work setting, it can come down to interpersonal competition, discrediting others, staying one’s ground, proving one’s superiority, and many other reasons related to the culture of an organization.

In an organization where failure is viewed negatively, people will always try to be right. They will reject new ideas and insights that would threaten their existing position.

To that end, motivated reasoning, in many instances, is a cultural outcome when it comes to an organizational setting.

At an individual level, you can broadly summarise motivated reasoning to egotism and self-interest problems. My idea is the best idea. I can’t be wrong. This frame of thinking is at the heart of motivated reasoning.

We attach our self-worth to our ideas and views. We attach our identities to our ideas. And it becomes impossible for us to change that view or pivot from that idea.

The first step to coming out of the motivated reasoning is divorcing ourselves from our egos. It doesn’t mean you don’t take yourself and your ideas seriously. You do. But you don’t attach your self-wroth and your position with your ideas. You take your ideas seriously but you remain wary of taking yourself too seriously. Once we can do that the rest of it is just a regular learning curve.

LATEST FROM OUR BLOG

RECOMMENDED FOR YOU

Pin It on Pinterest

Share This