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Entrepreneurial Mindsets. Or, Three Guys Walk into a Bar…

Entrepreneurial Mindsets. Or, Three Guys Walk into a Bar…

by Matt Chanoff

Posted on 25 September 2016

Three men: a rube, a nerd, and a wise guy, are walking into a bar when a piano falls on them. They appear instead in front of the pearly gates and there’s Saint Minerva waiting. “You’re not Saint. Peter” says the wise guy. “Correct” says the saint. I’m Minerva, the patron saint of wisdom. The rube says “Let me in, I’ve been good all my life.”

“This isn’t where people go when they’re good,” says Minerva, “This is where they go when they’ve got a clue. First we’ve got to play a little game.” She takes out a coin. “This is a fair coin. Chances are 50-50.” She flips it and it comes up heads. She flips it again, heads. Ninety nine times: heads, heads, heads. Then she says “I’m going to flip it for the hundredth time. Fair coin. What are the chances of heads?”

The rube says “It’ll be tails. That was quite a run, but a fair coin means it’s got to even out, 50-50, and it’s overdue. So tails.”

The nerd looks at him pityingly. “The chances on the next flip are 50-50” he says. “Lady Luck has no memory.”

The wise guy says “Heads. I’ll give you a hundred to one that it’ll come up heads.”

“You’re in” Saint Minerva says to the wise guy. She opens up the gate for him. “Wait, what?” say the other two, “What happened?” The wise guy looks over his shoulder and says: “The chance that it would come up heads ninety nine times is more or less impossible. Much more likely that she was lying about it being a fair coin.”

He goes in and disappears into the clouds. The rube and the nerd look crestfallen. As the gates slam closed. Saint Minerva says: “Don’t worry. Now he’s in there with the other sharp people. I specifically said it’s not heaven. Heaven’s over in that direction.”

So what does this little story* mean for an entrepreneur?

Think of four levels. It’s a hierarchy not because one level is better than another, but because operating on a higher level requires a take on the lower ones.

Don’t knock level one, where the Rube operates. He’s using his brain as it’s evolved, and it’s been a pretty successful organ. The way a cognitive neuroscientists see this is that the interpretive mechanisms in your brain, what Michael Gazziniga dubbed the “interpreter module,” operates concurrently and integrated with perception, not subsequent to perception. We don’t get to see the world and then interpret it; we can’t see without interpreting just as much as we can’t interpret without seeing. Coin flipping has an assumed meaning that interprets the events, the ninety-nine flips that landed heads, and the combination predicts a certain kind of world. That’s exactly the kind of prediction we make constantly, and that keep us alive. Is that rustle in the grass a snake? Dunno, but it fits the “snake” pattern well enough my amygdala will lead me to jump back out of the way, before my cortex can chime in and remind me there are no snakes in this country. Observation plus interpretation are a package that leads, after watching the first coin flips, to be absolutely sure it’s tails next time. The rube’s explanation, about it being a fair coin, didn’t lead him to his conclusion, it’s just an after-the-fact explanation of what he already knew for sure.

None of that is to say that the rube just operates on instinct. He can observe things carefully and discover a lot. He can connect the dots and draw new patterns. He can discard patterns when he notices observations that don’t square with them. A lot can be accomplished by the rube.

Then, after that kind of thinking had done pretty well for two hundred thousand years, we got the Enlightenment, and with it, a sort of unpackaging. The idea being that rules and assumptions aren’t just to be discerned from observation, but ought to be looked at separately; ought to be methodically subjected to tests and proved or disproved. That’s where we get level two. Statistical understanding becomes an important tool, and with it, the notion of a fair coin. Once the process of coming up with rules itself becomes an object of study, we shift from observing at random and detecting patterns to deciding what to test, deciding on a test procedure, and then reaching out for particular observations. Most of the built world around us is a testament to the incredible, unmistakable power in the scientific method. Nerds rule.

Except - and here’s level three - they don’t. What’s venerated as science is frequently nothing more than scientism – a veneer of impressive procedure that works to produce PhD.s but not results. Far from making accurate predictions, economists can’t even anticipate the direction of change, the most sophisticated equities analysts don’t do better than random, political scientists don’t know what will happen in politics, and so on. The wise guy in the story points to one way this happens; tunnel vision. Science sets up experiments to avoid exogenous variable, but the results often don’t apply in real life, where exogenous variables fly thick and fast. The wise guy knows that the rube is a sucker because he doesn’t know science. He knows the nerd is also a sucker because scientific technique has put blinders on him. So the wise guy wins. He gets in the door where the others are locked out.

But don’t forget the kicker in the story. Minerva knows something the wise guy doesn’t; she watches wryly as he struts through the wrong door.

The wise guy could probably beat most of us in all sorts of competitions, but his expertise isn’t the kind that can build a company. Minerva hints at what’s missing when she says “Now he’s in there with the other sharp people.” The wise guy took her for a gatekeeper; he beat her game and got through the gate. But she’s not a gatekeeper, she’s in the business of directing people where they belong. Where he belongs is with the people he connects with, the other wise guys.
Founding a truly scalable company requires instinct and pattern detection like the rube uses, but those things aren’t enough. It requires science like the nerd employs, but that’s not enough. It requires street smarts and out-of-the-box thinking like the wise guy’s good at, but that’s not good enough either.

None of those are sufficient, because the object isn’t getting the puzzle right and winning the game. The object is making a human connection. It’s seeing where a hidden path can go and building the path between the people of a company and the people outside of it. By “path,” I mean a reciprocal interaction, where the founders do for the outside people what they must have done but can’t do for themselves, and the outside people reciprocally do for the founders what they can’t do for themselves. Once that path is built, everything can legitimately acquire a label. The founder becomes a company. The outside people become customers. The thing the company does becomes a product or service, the thing the customer do becomes paying. A successful founder needs instinct and scientific method and out of the box thinking, but he or she can’t just be a creature of any of those things; they’ve got to be able to see each of them from the outside and treat them as tools. The founder has got to be a creature of connection.

*This post owes a lot to Nassim Taleb’s book The Black Swan. I stole the example of the wise guy from him, though equivalent analyses come up elsewhere.