Enterprise Failures And The Runaway Entrepreneurial Spirit

One main thrust in entrepreneurial education and development is to create a ‘venturesome’ mindset that allows for a higher tolerance of risk, bearing in mind that most people are risk averse and as a result make “timid choices” (Kahneman & Lovallo, 1993). Coupled with this is the effort to teach/train entrepreneurs the skills necessary in evaluating risky opportunities. While technical skills are important, what is also required is an understanding of the cognitive biases of humans (particularly toward excessive optimism) as the failure to address these biases will lead to ineffective entrepreneurship training programmes where budding entrepreneurs swing to the other end of the spectrum and become foolhardy risk takers and speculators. This paper proposes that entrepreneurship development programmes include tools to help entrepreneurs identify their own cognitive biases and help them overcome these biases. The three thinking tools reviewed are 1) “outside view” taking, 2) “shared experience view” taking, and 3) “reflective view” taking.