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Ode to Rational

Rationality is one of the most important qualities in entrepreneurs.

With a hat tip to investor Vitaliy Katsenelson, none of your skills as an entrepreneur matter if you cannot be rational.

Let's say you have excellent insights about your industry, strong leadership skills, talented people like working with you, etc. Great. But the sum of those skills and abilities must be multiplied by your ability to stay rational. In Katsenelson's words, "think of your ability to stay rational as a number between 0 and 1. If you are totally rational, you are 1." But if you struggle to be rational during times of opportunity or challenge, then the sum of your other skills won't really matter, because they'll be multiplied by 0.

Katsenelson applies this model to investing in the stock market. But I think it applies equally well to the process of building a business.

What stops us from remaining rational? Fear.

Fear, on the one hand, of missing out (otherwise known as FOMO). For entrepreneurs this usually takes the form of a competitor (or other "rivals") seemingly leaping ahead in the game of business, often with a splashy contract win or big capital raise.

Fear, on the other hand, of loss. Fear of loss (FOL, perhaps?) visits us during more difficult times when the business hits a major snag, such as losing an important customer or key employee. FOL breeds overwhelm and stress. This is what Ben Horowitz refers to as The Struggle, in his terrific book "The Hard Things About Hard Things".

How do you rate your rational score? Not when it's smooth sailing, but when you feel the pressure of others doing well or your own business doing poorly. At those times, are you close to 0 or closer to 1?

Keeping our rational score close to 1 during challenging times is a very proactive process. And it starts with structuring our lives and designing our work processes to follow our own path. Some simple examples:

  • Who is on your team? Is everyone committed to the mission and to each other? If anyone's behavior suggests "no" then they must go

  • Who is around your team? Think carefully about CPAs, attorneys, consultants, bankers, etc. - if these professionals bring ideas that are not aligned with your thinking and the mission of the business then you need to make a change

  • Who is in your network? This includes other entrepreneurs, friends, social network - the last thing you need is someone constantly crowing about their latest business or investing "success"...unless you're alert to this activity, FOMO is inevitable

  • How do you spend your day? I'm a big believer in calendar "white space" - time that is allotted (at least 1x per week) for you to do nothing but remind yourself why you are doing this and what you need to do to prepare for the next step

By paying careful attention to how we spend our time and who we interact with each day, we can structure our lives to protect against fear. We can create filters that expose us to what's relevant and leave out noise and distraction.

When FOMO shows up, we can't simply chase or follow what everyone else is doing. We need independent thinking, and we need to chart our own objectives and strategies. Moving at our own pace - sometimes quickly, sometimes slowly.

When FOL shows up, we need to focus on the road ahead. Get back to the mission and why we're here. And make sure our team remains committed to the mission and to each other.

How you spend your time + who you spend it with = big impact on rational score. Pay careful attention to these two things to stay close to 1.


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