That our brains are very much wired not for a multicultural, multipolar, global, interconnected, whatever world. They're wired for a small tribal environment where it's 50 to 150 people. And that's why we're so tribal. Buckle up, it's the Insurance Dudes Podcast.
SPEAKER_00Boom! Dr. Gleb. Oh no, I just said it right and then I messed up. Dr. Gleb Sapersky, welcome. Welcome to the Insurance Dudes. It is so awesome to have you on. You just wrote a fantastic book, Never Go with Your Gut, which I think that title may make a lot of entrepreneurs cringe a little bit because I think that they do go with their gut a lot, right? Moving quick and making quick decisions. But I think as we're going to understand and figure out and learn over the course of the next 30 minutes or so, that that can be very costly. You're absolutely right.
SPEAKER_03And thank you for welcoming me, Craig. We do tend to go with our gut much more than we should. And we'll talk about when it's the right thing to do and when it's the wrong thing to do.
SPEAKER_00Yeah. Why don't you give us a little bit of background and please include the fact that you went to Harvard? I think that's very important. But just tell us a little bit about where you came from, what and how you got to where you are, then let's dive into some other stuff. Sure. I did park my cart, have a yacht.
SPEAKER_03Perfect. Yes. But yes. But before that, yeah, I was always interested in decision making. And this is a topic that should be fascinating to any entrepreneur, whether you're involved in insurance or not. Because decision making is the fundamental thing that entrepreneurs, leaders of all sorts have to do. There's a reason that leader is synonymous with decision maker, right? That's your main job as a leader. We're taught to go with our gut. And you know what? That's what my parents taught me to do when I was a child, to go with my gut. You know, that's kind of the natural thing. You know, we're all told that trust your guard, follow your heart, go with your instincts, all of that. But as I was growing up, I saw that my parents, of course, were following this advice themselves, but they were making some bad decisions in their relationship with each other. So that was a problem. And what I saw, for example, so my mom would go out, you know, she liked to buy nice things, so she'd buy a hundred dollar sweater. My dad was kind of a cheapskit, so she'd come home and he'd start yelling at her, saying, no sweater should be worth over $20. And then she'd bring up stuff that he did wrong, and he'd bring up other stuff, and they go at it, you know. And again, again, and you saw, well, you know what? I saw this pattern repeating every month. Something would happen like this. And they were doing the same things that their gut was telling them to do every time that they went into it, and it was resulting in the same bad, bad, bad outcome. And that started causing me to think that, you know, maybe my parents giving me this advice does not mean that I should follow this advice, does not mean that it's necessarily the right thing to do. So I was coming of age. I was 18 in 1999, you know, when there was the people were partying, like it's 1999, for those who remember that song print song, maybe that ages me. I'm right there with you. Oh, there you go. So in that time, 1999, that was a dot-com boom. And all of those business leaders of webband, pets.com, boo.com, they were all booming. But when I was 21, just a couple of years later, they all went bust. And the people who were the heroes in the Wall Street Journal in 1999, there were the zeros in 2002. And you know what? They were the same people. They were making decisions the same way. But you know, one year they were praised, and another year they were criticized. And they weren't making decisions any differently. This taught me that it's not only my parents, it's the biggest leaders in society, the true, you know, multi-billion trillion. I mean, who remembers the AOL Time Warner merger, right? One of the worst disastrous decisions of all time. How many hundreds of billions of dollars did that waste, right? So that is a fundamental example of the kind of bad decision making that happens at the very, very top levels. You know, the titans of industry, the ones who control huge amounts of money, making the worst terrible decisions. Not even to talk about politics, won't go there, but there's some horrible decision making. So, going back to business, I decided that this is something that's worth my attention. And so I decided to study how do we make decisions. So, you know what? There's a science of decision making. I didn't know this, and I started studying it. And so then I got into decision making, I got into the behavioral science, and I went specifically into the history of behavioral science, which is the study of decision-making in historical and contemporary contexts. And yeah, I went to I got my undergrad at New York University, I got a master's at Harvard, I got my PhD at UNC Chapel Hill, and then I got, oh, I worked as a professor for seven years in decision sciences collaborative in the history department at Ohio State University. That's kind of my academic background. But, and that I spent about 15 years in academia doing various sorts of research on decision making and these dangerous judgment errors that we make just because of how our brain is wired, called cognitive biases. We'll dive into that later. And at the same time, already from 1999, I was doing various consulting on the side, consulting, coaching, training for businesses to help them make better decisions. So that's kind of the business side of what I do. And so I've been doing that for 21 years. And all of that experience is summarized in my book, Never Go with Your Gut, How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters. And that is indeed about why your gut and where your gut may lead you in the wrong direction. For talking about entrepreneurs, there is a reason that about half of all startups fail within the first five years, three-quarters fail within the first 15 years, and that's because entrepreneurs really tend to go their gut. And you know, their gut tends to lead them in the very bad direction. There are two big problems with entrepreneur decision making. One type of problem is not a lack of fit of product to market. One of the two big reasons why startups fail. And what happens is that entrepreneurs feel that their product or service should have a market. And therefore they launch prematurely without sufficiently investigating the market. They have a feeling that it will work. And you know what? They waste a lot of money, their own money, investor money, whatever. That's a big problem. And they burn and crash up. Now, the other type of big problem is that there is a fit of product to market, but there's insufficient runway, so insufficient capital, because entrepreneurs are not focused enough. They're trying to do too many things at once, experiment with too many things at once, as opposed to focusing on the thing that's most likely to work and going deep into it. Entrepreneurs tend to pursue lots of shiny new things. And that lack of discipline causes many, many companies. That's another huge reason, lack of cash, that because of these distractions, that they crash and burn. And so these are two ways that entrepreneurs follow their gut that really get them in hot water. And of course, this applies to all sorts of other situations. Not entrepreneurs, entrepreneurs, all sorts of leaders make some bad decisions. And this is all comes from that gut reaction, these cognitive biases, these dangerous judgment errors that come from how our brains work.
SPEAKER_00Huh. And so this is hardwired into our brains. And you've studied neuroscience, so you actually do have a little bit of expertise in this. Right.
SPEAKER_03So here is what's going on. So looking at our brains. Our brains, as you can imagine, are not really evolved, adapted to the modern environment. Now think about the modern environment. The internet really, which mediates so much of current life, has been around since the 1990s, right? I'm still a remember that E, ooh, E, when you're signing up, you know, getting up on the phone lines, you know, the Gen Z and millennials probably might not remember that.
SPEAKER_00And I think like the internet as we know it is more like a decade old, right? Like with the social media and all the and having it on you. This is 2007, right? The first version. So it's interesting. Like we're talking about, but you know what I mean. This is a 13. But like from a 13, 15, it's 15 years old to the earliest portable real internet browser type situation. And I don't even think it was good and caught on until 2010. So it is interesting, right? Like, we're basing so many decisions and doing so many things as a result of a technology that's less than two decades old. Right.
SPEAKER_03Our life is incredibly mediated by digital information, of course, with the pandemic that has been incredibly exacerbated. But going back to our brain, I mean, our brain has not had time to evolve for it. Our brain's evolution is really based in the ancient savannah. When we lived in small tribes of 50 people to 150 people, so we were hunters, foragers, and gatherers. That means that our brains are very much wired, not for a multicultural, multipolar, global, interconnected, whatever world. They're wired for a small tribal environment where it's 50 to 150 people. And that's why we're so tribal. So we are wired to look for people who look like us, who have our values, who have our predispositions, and so on, preferences. If we weren't sufficiently tribal in that tribal environment, you know, several thousand years, many thousands of years ago, then we would be kicked out of our tribe and we'd die. And that's a problem. And if we weren't sufficiently hostile to other tribe, then people from that tribe would take our tribe over and we'd die as well. Guess what? We're the descendants of those who didn't die.
SPEAKER_00Right.
SPEAKER_03So a little bit smarter. Well, a little bit more tribal. So we have a strong predisposition to look for people who are like us and be hostile to those people who don't look like us and who don't share our values and predispositions. So that tribalism causes a great deal of problems, tensions, and conflicts in the modern world. And we can dive into that. There are a whole series of these dangerous judgment errors called cognitive biases related to tribalism, the way we interact with people. Another set of dangerous judgment errors comes from what's known as the fight or flight response. You might have heard of it as the saber-tooth tiger response when we jump at 100 shadows to get away from that one saber-tooth tiger. Well, guess what? You know, the modern world has many, many less saber-tooth tigers. But we still respond in the modern world as though the threats we face are saber-tooth tigers. Now, in the ancient environment, it was good to jump intensely at 100 shadows. That's how we survived. Again, we're the descendants of those who jumped at 100 shadows and were able to get from the one of them away from the one of them that was the saber-too tiger. The ones who didn't, you know, got eaten by the saber to tiger. And so we have that instinct to make decisions very quickly, very impulsively, and very confidently, because that's what we need to do in the savannah environment. In the modern environment, we have much, much more time to decide, especially in business settings, and the kind of decisions we should make and the kind of information we should gather, but we tend not to. It doesn't feel right. It doesn't feel good. And so that feeling, that gut intuition, those feelings inside, they lie to us. They tell us that we need to make a quick decision, and it feels good to make a quick decision and move forward. That might have very bad outcomes for us, but it feels good. It similarly feels good to look for people and collaborate with people who have our predispositions, our value sets, and so on. And it feels good, it feels right, but it's a very bad idea in very in entrepreneurial business settings. So that's a huge problem. And there are a number of other problems. The specific way that our brain is miswired, and going back because of that evolutionary heritage, and also just because of the structure and wiring of our brain, the shortcuts the information processing takes, those are called cognitive biases. The specific ways that our brain is miswired. There are over a hundred of them, so you can take a look at the list of cognitive biases in Wikipedia if you're curious. My book, Never Go with Your Gut, How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters, talks about the 30 most dangerous ones in business settings and the steps that you can take to recognize and address each one.
SPEAKER_00Wow. So what I'm hearing, oh I'm gonna break it down into uh agent speak. What I'm hearing is the brain has adapted over the course of, or normally adapts over the course of, you know, from when it started, which is a couple hundred thousand years ago, right? This brain that we currently have. Yes. However, the industrial revolution is what, 150 years or 170 years ago, something like that. So we've accelerated technologically in a very small amount of time, but the brain had the 200,000 years yet to get to where it needs to be.
SPEAKER_03You're absolutely right. And you know what? If our brain did, we wouldn't need insurance people to sell insurance. There wouldn't be the guys on the sorry, I'm sorry, go ahead. No, no, no. We would be all rational and we would all be buying the right insurance for us, right? We wouldn't need insurance people. We'd be carefully calibrating the kind of insurance needs we have, and we go out and we get it, right? Right. So you uh you know, your whole business, insurance experts, is predicated, sell people who sell insurance is predicated on people being rational and not getting the right insurance that they need for themselves, and then needing advice and expert guidance on what kind of insurance they need and needing to be convinced. Because people greatly underestimate the kind of risks that they face. And insurance experts, salespeople, when they recognize that's what's going on, they can sell much better to their customers if they understand the kind of cognitive biases that their clients have and how to address these cognitive biases effectively. And that's just one example of where the knowledge of cognitive biases is very helpful for people in insurance.
SPEAKER_00Wow. It is interesting because it you can identify where this buyer is, and then you can make the right decision on how to proceed and help them get right insurance. The other thing that we obviously, especially men, have not evolved far enough is you see the guys with the ladder on top of the ladder, on top of the ladder, changing the washing the window or whatever. And so as long as those guys are around, there will be the need for insurance as well.
SPEAKER_03So that's really funny. I was just uh making the hard decision to not do some DIY work on my house because I feel good about myself and my, you know, I do some DIY work on my house, on the roof, right? But there was a situation on the roof where I would have had to place not only a roof to the ladder, but a ladder on the roof itself to get to the next part. And I looked at that and I'm like, no, that's kind of like a more intermediate advanced skill, and I'm not going to place myself in that situation. I'd rather pay you know someone a few thousand bucks to do that than you know take the chance of breaking a leg. But I did that and I had to work through my own desire to be the macha man and work on the roof and go on the roof. Now, one of the biggest cognitive biases for entrepreneurs is something I mean, I'm an entrepreneur. I run a six people consulting company called Disaster Avoidance Experts. That's a future-proofing consultancy which addresses people which addresses these dangerous threats and missed opportunities through cognitive bias risk management. And so it's very tempting. I'm an optimist. Now that's one of the biggest cognitive biases, as I mentioned, that entrepreneurs have. They perceive the world as full of opportunities, full of not danger, but full of chances, full of rewards. And so it's something that they are unfortunately tend to be risk blind about, and I do too. So I tend to see the world as kind of a mostly friendly place, I tend to be too risk-blind. So I know that, hey, I'm very likely to be making mistakes where I underestimate risks and am too optimistic. And I had to calibrate my own personal life decision making, not simply business decision making, to say, okay, I am underestimating the risk of going on the roof and placing the ladder on the ladder, placing the ladder on the roof itself. And that's not that may not end well. You know, maybe I have an 80% chance of success, but do I want the 20% chance of breaking my leg? No. That's not worth it. You know, the the paying someone a few thousand dollars is worth avoiding the 20% chance of breaking my leg. So, right, that's but that's not a very human, intuitive, natural thing to do, right? To make those probabilistic calculations and trade off that money against 20% chance of breaking a leg, right? Right. So, how much is your breaking a leg worth to you, right? Right. That is a difficult thing to do. And you have to work within yourself because it feels like I can do it. You know what, 80% chance that I can do it is a reasonable estimate in that sort of situation. But do I want to take that 20% chance that I'll again break a leg or something? No. But that's something that's a difficult thing to do for entrepreneurials who are more optimistic, like me. And of course, people in insurance often tend to be optimistic even though they sell insurance, because to be a salesperson, you have to be pretty optimistic. It's a difficult thing to do, to sell to people, and you have to be optimistic about your abilities and have that optimism cheeriness to do sales. This is a difficult thing to do, and people have to understand this. And the optimism bias, so that's kind of the fight or flight response, the quick decision-making aspects of the optimism bias. Let me go to the tribalist part of optimism bias. It's very intuitive and tempting for me to work with other people who are optimists. So we're talking about tribals, right? It's definitely a predisposition. Now, imagine it's a six, I have a run in six people company. Imagine if I was hiring people who are optimists around me. I mean, I'm an optimist, I'm the kind of person who wakes up before breakfast and I have 20 ideas and it feels like they're all brilliant. You know, that's how it feels internally. I've learned in my birth experience that they're far from all brilliant. So what I have learned to do is that even though I would love to work with other optimists, I click with them very well. If I have five other optimists on my team, that means 120 ideas before breakfast, and we all reinforce each other's ideas because it feels like they're all brilliant, and then we're running in 120 different directions, and then my company goes bankrupt because you know we're not focused enough on doing the right things. So I make sure to hire into my company people I really don't like and enjoy working with who are pessimists. These are the opposite of optimists, not necessarily lawyers. Lawyers only one subcategory of lawyers. No, seriously, they are a subcategory of pessimists, but also people who are accountants, people who are quality managers, people who are in procurement, people who are in Right, exactly. I see your face, right? All just the people I can't be around. Yeah, exactly. And it doesn't feel good to me either. But the thing is, I bring my ideas to them, and uh they say, well, you know, these are all have baked potatoes, but maybe these three potatoes are worth finishing baking. And they are terrible at generating ideas. You know, you don't see lawyers generating brilliant ideas or accountants or so on, but they're great at evaluating the flaws in existing ideas and addressing these flaws because they see the flaws and they are great at improving these ideas and implementing them. They have their feet on the ground, they know how to operate and implement very well. I'm much more of the floating up in the air person who's excited and engaged, I'm the idea person and strategy. Sure. And they are much more implementation, improvement, management. And you need both to have a team be effective, you need both to have a business be effective. If you don't have enough people who are either type on your team, now you usually want the entrepreneur to be in charge, unless it's a law firm, right? But you want an entrepreneur to be in charge of the organization, to have that vision, but you want somebody who is second in command to be more in a pessimist camp and kind of holding the person's feet to the ground. And so this is an example where you need that collaboration to work well and you need to deliberately go against your intuitions in order to make good decisions.
SPEAKER_00Yeah. I just it it makes me think, like I'm trying to think of examples to provide an argument against this just because I'm an optimist, obviously, and an entrepreneur. So if I take Thomas Edison, right, creating the light bulb, which we can all agree, everybody listening as well, that changed the world, right? Changed the impact of how we everything. And how many, I think it was a thousand or two thousand different attempts at creating the filament that would burn long enough, right? And it came from bamboo or something like that. But had he listened to the negative Nancy's that would have something to say about it along the way, I'm certain that there were plenty of people that told him he's crazy, right? Along the way, then there wouldn't be a light bulb. So at what point do you say, you know what, screw it, I'm gonna keep going, and I don't care about this bias? Or is it just help me navigate that?
SPEAKER_03Sure. So it's the situation with Thomas Edison is a little bit tricky in terms of that because each of the things he tried, he was experimenting. So he could have stopped at an earlier point. It's not like you know, he didn't have things that were pretty good. He was looking to improve on an existing so he came up with one thing, it burned for a certain amount of time, but he wanted to make it better. So it wasn't kind of you know, inventing the light bulb was a zero to nothing. It was a process of gradual improvement. So Thomas Edison perhaps is not the best example. Okay. It's often the case that an entrepreneur is not going to be successful with his or her first company. Right. Right, they often, you know, that's why I talk you hear people about being serial entrepreneurs. Maybe you're gonna be successful in your second or your third company. And you'll often see that investors. I mean, I do some advising for VCs. And when I talk to VCs and when we are evaluating, when I'm helping them evaluate a potential investment, I often look at the investor and see, well, entrepreneurial team, and see have they actually run a startup before? Has it failed? Did it fail for the right reasons? Meaning something like, well, they learned something from it. You know, the idea was almost good, but there was something about the project or the environment. So what was the situation that they have experienced? Yeah, so if they failed before, if they failed for not incompetence, but external contextual reasons, I like that sort of investment more than someone who has not failed before because they're less experienced. So you want to see if an entrepreneur learned and got out of a failing enterprise in a timely manner. Because if you don't get out and you try to grind on when it's really not something that's taking off, you know, it might become a hobby for you, but it's not going to be a good business. So you don't want to invest uh too much of your efforts into an idea. Even if you're an optimist, you want to be optimistic about failing fast. You've probably heard this phrase, failing fast, of course. And so this is where you want to apply it effectively. So when you're looking at what happens, kind of the probabilities involved, you see that people are much more likely to keep going longer than they should with an existing project. It's called sunken costs. So we're talking about another cognitive bias. So sunken costs, that's one of the cognitive biases, where when we invest resources, money, time, efforts, emotions, social capital into some project or into some relationship, we tend to keep throwing good money after bad. Why is that? Well, we have an emotional attachment, and emotions here are not our friends, unfortunately. In evaluating ideas and projects rationally and effectively, your gut, your intuitions, your emotions, your heart, your instincts, whatever you call it, that's not going to be your friend, unfortunately. So our emotions are often going to lie to us. They're going to tell us that, okay, I'm emotionally attached to this thing. You know, I've invested some money into it. I can't just give it up right now. I'll give you an example. I was just talking to my parents.
SPEAKER_01Hey, Jason. Yes, Mr. Craig. That was another awesome episode, wasn't it? Mm-hmm. Well, if people want to get a little bit more action and learn how to do uh write 100,000 in premium. Yes. Even the worst internet leads, where could they go? They can go to live.teledudes.com. Ooh, that sounds exciting. Are we gonna be there? Yes.
SPEAKER_02It's a weekly call that we're doing right now that will, it's live and it will show you the process. The entire process is super awesome.
SPEAKER_01I love it. Let's do it.
SPEAKER_02Let's do it. Sign up right now, live.teledude.com.
SPEAKER_01Live.teledudes.com. That's live.teledudes.com.
SPEAKER_02Hey Craig, there's a new community that we are starting that I cannot wait to tell everybody about. It is our live texting community where you and I are going to answer people's questions and give them free content.
unknownRight?
SPEAKER_02Are you kidding me? We get to talk to them? Yeah, which is awesome, but they have to opt in. They have to text us at 520-214-2219. That's 520-214-2219. Nice. Greg, are you gonna respond to these texts? I'm gonna respond to them for sure. Live. I'm into it too. It's gonna be awesome. And it's a it's gonna be our new texting community where we're gonna get back to everybody that we can and drop some crazy content. Free content and free um the calculator that you just came up with. That's right. The calling calculator. Sales material. I mean everything for insurance agents. This is it. It's the best texting community out there for insurance agents. Well, what the heck is that number again? I can't remember it. It's 520-214-2219. That's 520-214-2219. I love it.
SPEAKER_01I'm gonna text it right now.
SPEAKER_02520-214-2219!
SPEAKER_01Alright, I'll see you later, Mr. Jason.
SPEAKER_00I love it. Nice.