The Cerebral Trap

Get your feedback from the market, not peers. Think less, do more.

Smart people are prone to fall into cerebral traps. A cerebral trap is when you seek answers based on over-analysis. Over-analysis is thinking that you can analyze and think your way into every answer, when the real-world is far more complex for our brains to fathom. This can be detrimental in 2 main ways: 1) over-analysis dilutes your thinking 2) over-analysis often takes the place of real-market feedback.

Over-analysis dilutes your thinking

Over-analysis in decision making (whether in business, or otherwise) can lead you to forget the forest for the trees. It causes you to not focus on what truly matters. You can be so focused on the minor details that you forget to look at the bigger picture and understand the big leverage points in the decision you are making. For example, you can analyze a 100 different metrics for your business including login rates, email open rates and so on, but fail to focus on why customer count and revenue are declining, the metrics that are more important. Another example comes from my Private Equity days. Even though there were times when we knew upfront that we wouldn’t invest in the company, we spent hours modeling the details in a vain effort to try and do the deal. This took time, energy, and attention away from the investments that mattered.

Over-analysis also makes you think you are making smart decisions because the work you’ve done, the numbers you’ve presented, the spectacular presentations you’ve made, all signal good analysis that went in. As a result, you are less likely to question your decisions, and fall into the over-confidence trap.

Over-analysis takes the place of real-market feedback

Over-analysis can lead you to make decisions based on this beautiful analysis you’ve done instead of real-market feedback. Say you go through a ton of market trends and customer data, consolidate it into a presentable analysis, and then make your decision on which products to launch or quench based on this analysis. This takes you a 100 hours of work before you actually ship any product. Instead, could you have shipped the product and decided based on market feedback whether to keep it going or the quench it? It wouldn’t just have saved you 100 hours of work, but you’d be getting products to market faster and basing your decision-making off of real-market feedback. On the converse, your analysis could have caused you to not a ship a product which could have been very successful with the market. You’d trick yourself into thinking your way through a decision, instead of being action-biased and getting market feedback. Of course, this only applies in case where the product being shipped is not very capital and time intensive.

Over-analysis gets its feedback from other smart people instead of from real market feedback. Your goal becomes impressing the executives in the room instead of seeking the truth. You present your analysis to win the affirmation of your leadership team who lauds you for the stellar analysis. Everyone thinks they’re working for the customer, whereas they are just keeping a show going internally. This is also where the principal-agent problem comes in. Employees care about impressing their managers and very often the way to impress them is to show the analysis of your work. This way they think you’ve done work and it’s hard to fire someone who is presenting good analysis. Managers, in turn, can hide under the umbrella of sounding smart by presenting analysis to their managers. This analysis charade can keep going with very little being shipped. In reality, the company could have been better off just executing and taking action, instead of making fancy presentations.

The real world is too complex to over intellectualize

Smart people are especially prone to this analysis trap because they have been taught “critical thinking” and the importance of being cerebral at their elite universities¹ and MBA programs. These are the intellectual-yet-idiots that Nassim Taleb pokes fun at. People who weren’t taught to over-analyze everything tend to be more scrappy, and action-biased because they’re not in their heads so much.

The real world is too complex to over-intellectualize. This is something that is missed by the elite education system and many corporations.

Over-analysis is not the same as zero thinking

Over-analysis does not mean one shouldn’t think through decisions at all. In fact, in today’s age of leverage, a few good decisions can compound into big winners. So, it’s important to think through those decisions.

Over-analysis merely means not deluding your decision-making by thinking that you can analyze and think your way into every answer, when the real-world is far more complex for our brains to fathom.

It’s also worth noting that certain industries tend to suffer more from over-analysis than others. For example, if you are an entrepreneur, you are better off executing rather than analyzing. But research, investing, and scientific professions certainly benefit from some level of analysis. One has to assess the situation for themselves.

So when the time calls for it, avoid the cerebral trap. Get your feedback from the market, not peers. Think less, do more.

1. To be clear, I too went to an elite university, and have been, and still often am prey to this cerebral trap. This post is therefore more of a reminder to myself to avoid this trap.