Confirmation bias is a dangerous thing. It got us into a 20-year war in Iraq. George Bush’s cabinet was full of confirmation bias. It’s a really hard phenomenon to shake.
In business school, we did a 1970s era case about an English company. They wanted to build a coal-fired electric plant. There was one guy in the room that spoke up against the plant. The confirmation bias was so strong against him that the others in the company character assassinated him, and marginalized him.
They built the plant and it was never started because it never was net present value positive. It was a total boondoggle. But, confirmation bias won out.
We see that consistently today and I think social media makes it easier to create and enforce confirmation bias.
I have seen it in the global warming debate. I have seen it in the Covid debate. I have seen it consistently in our political discourse. People are being shut out of opportunity and their reputations assassinated purely because one tribe needs their dissent squelched.
I was reading Fred Wilson’s blog the other day and he talked about getting Covid. His wife got it too and both were vaccinated and boosted. Fred and his wife are of the elite left. He writes,
I want to return to the pandemic before I wrap this year-end post. Sitting here with a mild case but isolating so I don’t pass it on brings home for me that our society has really struggled to find the right balance between what is right for the individual and what is right for society during this pandemic. We can’t agree on anything. Vaccines, masks, lockdowns, schools, offices, etc. Those who have a high tolerance for risk believe that we have gone way overboard in trying to manage this pandemic when we never could. Those who believe in government, public health, etc, believe that those with a high tolerance for risk are putting all of us at risk. And I think the truth lies somewhere in between. This pandemic is a metaphor for the broader inability of society to find a way to move forward together.
Fred might be waking up. He is right that we cannot move forward together. But, our views are so diametrically opposed there is no compromise. Social media makes it easy to stake out a position and hold it.
At the same time, there can be no compromise on certain principles. We are seeing the beginning of a titanic battle here in the United States. The easiest way to summarize it is Socialism/Communism vs Capitalism, but it’s bigger than that. The core advocates for Capitalism also detest “crony capitalism”. That’s a different beast altogether and tougher to defeat.
Fred is ignoring the data on Covid because it doesn’t fit his view of the world. When you look at the effectiveness of vaccines, you realize they aren’t effective at all. Barely. Really makes little difference. The best “vaccine” is getting Covid and having natural immunity. Protecting people over 70, obese people, people with co-morbidities was and is a good idea. But, the rest of us need to live life-maskless with no restrictions.
Bad interpretations of statistics have led to bad policy. It has also given a license to racists to deny healthcare, deny opportunity, and deny a normal life to people who are unvaccinated. Never before have we seen that in the United States.
The broader point is confirmation bias leads to bad policy and bad decisions.
That takes us to Theranos and Silicon Valley. Let’s look at some undercurrents that have been pulling Silicon Valley’s confirmation bias like a riptide.
Everyone makes the assertion that female entrepreneurs are underserved. You can’t go to a Silicon Valley publication, a conference, a blog post where you don’t hear that. People just stupidly repeat it without even looking at hard data. Everyone cites a very dumb statistic to bolster their point. They look at who got funding.
But, “who got funding” is a 100% dependent variable. There is no “normal distribution” when it comes to funding startup companies. It’s sort of looking at case counts when ascertaining data on Covid. Case counts don’t matter.
Somehow, white guys that are partners at VC firms are so racist and discriminatory they will never fund females simply because they are female. That logic is utterly stupid.
What really matters in venture funding is how many women-led companies pitched? Of those, how many received funding? When you compare it to male-led companies who pitched and received funding, what’s the percentage look like?
I don’t think one VC passed because someone was female. The business just doesn’t work like that since it is competitive and everyone wants to get a big return on capital. I can’t imagine someone in a meeting actually saying, “We can’t fund her because she is female.”
They’d be laughed out of the room and deservedly so.
There also isn’t some sinister code VCs use to speak in to deny funding to females.
Female-led companies might not be funded because partners at VC firms don’t see the market size. The partner might not buy into the premise the entrepreneur lays out. That’s a selling skills problem on the part of the entrepreneur. It’s up to the entrepreneur to ask the right questions to uncover the misunderstanding so they can explain it to the VC and lead them to the mountaintop.
There also is the notion that not all ideas are good ideas. Not every pitch gets funded. Besides, if you go into a pitch with a chip on your shoulder that says everyone across the table from you is discriminating against you, it comes through on the pitch. They aren’t going to fund you.
When you hear a “no”, try to uncover the reason for the no. Don’t accept the “it’s not for us”. It might be painful for you to hear but listen and don’t argue. This company is your baby after all. The VC isn’t funding you but you are getting unvarnished feedback. You want the money and love your idea but they aren’t going to see things your way no matter how much you argue back.
I think people were clamoring to get into Theranos because it was a female-led company and they all wanted to pound their chest and say they were a part of it. It was not funding, it was virtue signaling. It’s as if somehow if they invested it was like a baptism that gave them salvation. For goodness sake, conservative media mogul Rupert Murdoch invested. Don’t think he didn’t analyze the optics of investment more than he did the nuts and bolts of the company required to make the actual investment.
This was especially true at later stages of the funding cycle.
There is no doubt that Elizabeth Holmes did things that were wrong. But, she knew what she was doing to feed the confirmation bias of her investors. The whole Steve Jobs act was a part of that. There is also no doubt that no matter how much money she took, she wasn’t going to be successful. It was a failed idea.
The reason that she was so celebrated was that she was a female that had raised lots of capital at high valuations. If she had been male, the stream of glowing articles wouldn’t have happened. Not only that, if she had been male what she was doing might have gotten more scrutiny and the fraud might have been exposed sooner. Confirmation bias stopped that from happening.
Twitter will cancel my account for this but the broader point is there are biological and hormonal differences between men and women despite what we hear today. Those differences can account for a small percentage of the differences in choices that we make.
It could be that in the past ten to twenty years, females weren’t starting businesses. They might be less risk-loving than men for some very good reasons. First is only females can have children. That’s a big deal. It takes a year off a woman’s life carrying a child not to mention the amount of time it takes to take care of that baby once it is born. Men cannot bear children.
Getting pregnant and having children shouldn’t preclude women from being CEOs and raising capital. However, it is a part of the decision matrix when they are designing the life they want to lead.
Maybe some women were choosing the security of a corporate job versus the brain damage and risk of doing a startup. I can remember when women were supposedly frozen out of the corporate ladder-type jobs. Now they have them in spades. Women run Fortune 100 companies. They are in top management. They are partners in law and accounting firms. No one bats an eye. Shouldn’t we be celebrating that? The 1970s and 1980s are over and far back in the rear view mirror.
Maybe some women are more comfortable balancing family life with an independent consulting gig or running a small lifestyle business. There is no shame or crime in that. They aren’t failures. They aren’t failing anyone. They are doing what they want and creating an opportunity for themself and that’s what we should be happy about.
I think the same can be said for anyone that grew up poor or lower to middle class. The safety and security of a corporate job bring them the stability that they never had previously in their life. You cannot blame them for doing it and I think the venture community looks down their nose at people like that. It’s as if they failed their tribe.
They shouldn’t. Freedom of choice should never be demonized. Success comes in lots of shapes, sizes, and forms.
The pendulum in Silicon Valley has swung. You go to a conference and see a panel and no white guys need to apply to be on it. They are non-persons when it comes to public discourse. God help you if you are Republican. Virtually every accelerator I get email from tout any business except the ones run by white males. I always thought it was best to celebrate any entrepreneur.
I know of white males who can’t get jobs purely because of their skin color. I know of law firms that told white male summer interns they need not apply, they weren’t hiring white males.
I have been told “No” so many times in my life. I was told by headhunters and VCs that I had no talent when it came to investing despite the fact I had a successful track record and all the “qualifications”. With my own portfolio I always try to find Series A funding for companies I am invested in and I get told “no” significantly more than I get told '“yes”. It has nothing to do with anything except for whatever reason the company I am introducing doesn’t strike a nerve within the VC firm.
I have been told “No” because I am an out of the closet Republican. It bugs me but there is nothing you can do about it. You have to accept the new Jim Crow and move on.
I know this. Investing is super risky and super tough. If you artificially limit who you will invest in based on race, gender, sexual orientation or political affiliation you automatically are accepting a lower return for yourself and your investors.
You have to do everything you can to eliminate your personal confirmation biases when you invest. It’s often hard to be objective. Recognizing it is the first step. Figuring out how to have an internal devil’s advocate for yourself is difficult but essential if you are going to try and hold onto objectivity.
Objectivity is becoming shorter in supply in all things these days.
IMO, the single most damaging lie we have told ourselves the past 50 years is that men and women are the same, except for their plumbing. This has caused SO MUCH pain, heartache, bad policy, and on and on.
And the fact that 2 or 3 generations of folks have drunk the Kool-Aid will continue to have terrible consequences for many years to come.
Whether you believe that God (Designer if you will) hard wired us to be different and complementary or we evolved this way, it is still TRUE.
I wish I could fly but my "belief" in the LAW of gravity has nothing to do with me not being able to take wing and fly. It is the FACT of gravity that keeps me on the ground.
In the same way, no matter what someone "believes" regarding the sexes, they will continue to make HUGE mistakes and end up broken in some way if they don't understand, accept and behave according to those differences.
Great Post and Happy New Year!!!
Fred's comments seem like they are coming from a different realm. He puts the two sides into their boxes, while completely blowing over the facts regarding the vaccines utterly failing as marketed. What does it take to admit that the holy grail has imploded? He virtue signals how he's isolating "to not infect others". Like, no shit sherlock, who does not stay home when they are sick? Only the right goes out with the flu to go sneeze on grandma at the grocery store, I understand this now.
How dare you point out that woman and men are different? Dear God, what is the world coming to? I'm deeply offended.