Be careful about how your brain works.
The golden rule of investment is “past performance is not an indicator of future results”. The rule is applied to human performance as well. But many people — not only investors but also ordinary business people — don’t think that way.
Here are some examples:
- Most of my ex-bosses liked to evaluate people by the university they graduated.
- Many recruiters judge candidates as bad by only looking at their CVs, no matter how good the CVs are written.
- In Japan, companies don’t want to hire someone who has failed in their career — especially a failure of their own businesses — even if they learned a lot from their own failure.
These are also the examples of cognitive biases — the signs that our brain gets lazy. These biases sometimes work well, but quite often the golden rule supersedes.
Don’t let your cognitive biases play an important role in making business decisions. The golden rule is also applied to how our brain works — the auto-pilot system of our brain sometimes goes out of control.