D4 model
Start with asking yourself, “What is happening?” Determine what possible biases are at play and what you’re seeing as evidence.
Then move to asking yourself, “What do I want?” Do you want clarity? Do you want to confirm that there is by his present? Do you want to address the potential bias?
Then move to asking yourself, "What do I need to get there?" What’s the plan? Should I observe more? Should I ask some questions?
Finally you should ask yourself, “What’s the next step?” Should I take some action? Should I say something?
Applied Exercise
Below, you will go through an exercise for each of the 10 biases to give you a chance to apply the D4 process
Note: in a live environment, the answers input below would save and be avaiable for viewing, print and email
Overconfidence Bias Exercise
You just had a good 3rd meeting with a prospective investor, and he "promises" to come in at $2 million in Q3 because one of his investments will definitely exit in Q2 and there will be fresh cash to invest. Q3 comes and the investor backs out because the exit didn’t happen.
Self Serving Bias Exercise
Comment from an allocator: "Even though you have had 3 exits, you have only invested your own money. I don’t think you would have the same luck investing other people’s money." You’re confident your performance was based on your skills
Herd Mentality Exercise
"I follow Dick’s lead. If he writes a check, I’m in as well."
Loss Aversion Exercise
A potential co-investor who is considering taking a position in a Series A round (not a lead investor) is adamant about an anti-dilution clause.
Framing Cognitive Bias Exercise
One co-founder to another, "How should we position our pitch message: 1) as an opportunity to be part of a much-needed systems' change; or, 2) as a hedge against lost opportunity in the future?"
Narrative Fallacy Exercise
LP: "Even though the references for your fund and theirs are impressive, Maria’s story really resonated with me. I definitely see where she is coming from."
Anchoring Bias Exercise
LP: "I’m was just meeting a manger who’s raised a dozen funds. I realize you are an emerging manager, but what can you tell me about your track record?"
Confirmation Bias Exercise
You: "My investment strategy has been working well so far, why should I change what isn’t broken?"
Hindsight Bias Exercise
You to your partner, "I remember telling you I had a bad feeling about accepting their check, now we have to deal with a nightmarish investor who is totally not aligned with our mission and values."
Representativeness Heuristic Exercise
Asset Management Allocator, "Over the last 5 years, I've invested in 3 minority-owned funds, including 2 led by women. None of them were able to perform. It doesn’t seem like women and people of color just don't know how to run money."