Being aware of these biases and limitations of the mind are the first step in solving the problems they create. In the field of debiasing this is referred to as “Changing the person.” But even awareness has its limitations. You can be aware that your lower brain is overriding your upper brain whilst eating an entire carton of Ben and Jerry’s ice cream and still do it. That’s why it’s important to also use a second tactic in debiasing and “Change the environment.”
One of the best examples of changing the environment I’ve come across is “Pre-commitment.” As the authors of a Wharton paper called A User’s Guide to Debiasing write, “A classic example of pre-commitment comes from the story of Odysseus who tied himself to the mast of his ship (thus relinquishing control of his vessel) before encountering the enchanting music of the Sirens – sea nymphs famous for luring sailors towards deadly rocks.”
A more practical example of pre-commitment is separating money into different spending pots. For example, I could have told myself that I would take home 50% of the profits each month and invest 50% into growth. Then the process of deciding if I should invest would have been separate from how I should invest, and I could have avoided lower brain rationalizations like “All agencies are a rip-off” and instead sought the most efficient channel to invest in given a fixed amount of money. This same principle has proven to help countless individuals save for retirement in their personal lives.
To conclude this story I want to provide 3 suggestions on how you can avoid making the same mistakes that I did:
Find a broker who will value your business
I encourage entrepreneurs to spend time learning how businesses are valued. The easiest way to do that is to actually value your business. Business brokerage services like Dealflow, FE International, and Empire Flippers offer free valuations. Having someone valuing your business is a great way to show its weaknesses and areas that you can improve.