Shared Information Bias
The shared information bias is a cognitive bias defined by Wikipedia as the tendency for group members to spend more time and energy discussing information that all members are already familiar with and less time and energy discussing information that only some members are aware of.
Investors focus on information their investor group already knows and talks about but spend less time on information that is not well known.
In diligence, investors focus on the areas they already know and give less attention to the areas that are unknown.
To overcome shared information bias, consider the following:
Create a checklist of key topics to discuss and move the group forward through the list.
Give weight to the voices discussing diverse opinions.
Look for those who have experience with the topics and highlight their opinions.
Expand your group to include others who have more diverse experiences.
Capture the dialog into written form for follow-up review.
It’s easy to talk about the things you know and more difficult to discuss that which is new.
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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.