Neglect of Probability

Neglect of probability is a cognitive bias defined by Wikipedia as the tendency to completely disregard probability when making a decision under uncertainty.

Investors can be biased by their previous experiences and ignore the probability of success or failure in potential startup investments.

Those who lost money on previous investments may be slow to invest while those who made money are more likely to invest.

The probability of success or failure is the same for both.

Recognize the probability bias in making decisions. 

Intuition, while helpful, can be tricky to use in startup investing. 

To overcome the bias, determine an amount to invest and a criteria.

Invest according to the criteria till the funds are deployed.  

By making the decisions based on specific criteria and for a predetermined amount of money, the probability factor is taken out of the process.

 

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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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.