Overconfidence Bias, The Cave you Fear, Mechanical Turks

1.Overconfidence Bias

I want you to guess with 90% confidence, how many lakes there are in Africa?

You’re allowed to use a scale for your guess.

Example: 50-100 lakes or 75-350 lakes

Obviously the wider the scale the less confident you are. 

But I want you to guess with 90% confidence.

Answer it in your head before reading on…

Unless you have studied the world lake database, your guess was probably way off like mine: 300-400

Even though you were allowed to guess with whatever scale you wanted that gave you 90% confidence. 

If you had absolutely no idea on how many lakes there are in Africa, you could have said between 1 and 10,000 lakes. 

A lot of the time we are overconfident with our decision, regardless of the limitation of our knowledge.  

This leads to massive errors in our decision making process.

The answer is 677 lakes in Africa.

Three strategies for helping with this bias: 

1. Consider way more possibilities/outcomes that are non-obvious. 

2. Seek different opinions from outsiders, and listen to alternative (sometimes crazy) points of view.

3. Embrace the limits of our knowledge.

2. The Cave you Fear

These quotes resonate deeply with me as an entrepreneur.

We all face moments where fear paralyses us.

We procrastinate, put things off, or simply avoid taking action because we get consumed by the imagined process of going through it.

We conjure up images of public embarrassment, fear of failure, or looking foolish.

Stepping into the unknown feels like entering a dark cave.

But the truth is: once we're inside, it's usually not as terrifying as we imagined.

We discover unexpected resources and strengths we never knew we had.

Joseph Campbell elaborates:

“It is by going down into the abyss

that we recover the treasures of life.

Where you stumble,

there lies your treasure.

The very cave you are afraid to enter

turns out to be the source of

what you are looking for.

The damned thing in the cave

that was so dreaded

has become the centre.”

I think of these two quotes a lot when I'm faced with something that I know will be difficult and uncomfortable.

And most of the time I've found myself to be conscious of the fact I know it will be good for me in the end. 

In many ways it’s a calling.

The thing you know you should do, but fear to do, pulls you in.

It's often transformative. 

Big or small.

Tips for entering the cave: 

1. However big and daunting the task. Break it into three phases. The start, the middle and the end. Then set small actionable tasks for each phase, moving you forward as each tiny little task is completed. 

2. Enter the cave with assertiveness and confidence - even if it’s fake. Stand tall. Chin up and take ownership of whatever it is.

3.The Mechanical Turk

In 1770 Germany, people were blown away by an automatic chess playing machine that could beat some of the best human players. 

The machine toured Europe and operated for 84 years, beating Napoleon and Benjamin Franklin. 

In 1854 it was revealed that the whole thing was a hoax. There were in fact chess masters hiding inside the machine playing people all along. 

Fast forward a few hundred years, IBM used a similar strategy to validate a speech-to-text product they were thinking about building.

This was long before AI and Siri; and just before the internet.

Personal computers were starting to take off and workers were beginning to type a lot. 

IBM had an idea: could they speed up the amount of words people type by enabling them to speak into the computer and have the computer translate the words into text on the screen. 

Sounds trivial right now, but at the time it was hard to believe. 

R&D for this product would have been in the 100’s of millions of dollars. 

IBM created their own Mechanical turk. 

They went to a conference, set up a mock workstation with a computer box, monitor and microphone connected to the computer. 

They asked potential customers to give it a try, speak into the microphone and watch the words appear on the screen almost immediately. 

Here’s the Turk…

IBM had a highly skilled typist in a room close by listening to the audio from the mic and typing the words onto the computer as the person spoke.  

People were shocked and amazed at this technological evolution. 

However, they weren’t shocked and amazed enough to pre-order or buy.

Turns out people preferred typing, and didn’t want to speak into a computer all day. 

So IBM canned the project and saved themselves 100’s of millions in the process. 

We followed the exact same process when we started Partnar.io - you can read about it here. 

The point is this, you should test and validate the product before you spend time and resources on building the product. There are a lot of ways to validate before building.

Designing and building a product is the easy part. Distribution, selling to and retaining customers is the hard part - especially if they don’t want what you’ve built.

If you have an idea, I'd love to hear about it and point you in the right direction of validating without spending thousands of dollars.

This email is long.

Would you prefer them shorter and more frequent?

Thanks for reading,

Ryan Elliott