A Practical Guide to Overcoming Investment Biases

In business and investing, bias may be the invisible wall that keeps founders, investors, and executives from seizing opportunities to change their industries. Its whisper is subtle, seductive even, because it is couched in personal experience and instinct. But that’s a poor instinct, as history has also shown. Your experience is not proof of the market. Your tastes are not absolute. And your blind spots are not badges of pride.

Consider the well-known rejections: rejecting fintech when you already have credit cards; rejecting edtech because your children went to private school; rejecting healthtech because you have health insurance. These are not merely “missed deals”; they are symptomatic of a larger issue, the presumption that the market looks like you.

Ike Eke, who set up Beta Ventures in Lagos, learned that early on. Armed with hard numbers and an eye toward the world outside of his own, he identified and invested in what Silicon Valley did not. In under three years, he had three unicorns in his portfolio. But he also remembers the pain of rejecting something too soon: “Never dismiss opportunity without seeing the numbers. Look into it. Question things. “Look at trends.”

The above story is not just another anecdote. It is a call to every decision-maker, the next billion-dollar idea may not be something that you would use. But that’s exactly the problem.

 

Why Bias is the Silent Killer of Innovation

The Myth of Personal Relevance

Closely related, and probably one of the biggest mistakes made in assessing opportunities, is to think that if a product or service doesn’t appeal to you, it won’t appeal to anyone else. This mentality is especially perilous in a diverse and complex market like Nigeria and Africa in general. A founder or investor in Lagos, London or San Francisco might not see the need for fintech if they already have easy access to banking services, without knowing that millions are still unbanked.

In fact, the World Bank estimates that 1.4 billion adults remain unbanked worldwide. Fintech, for them, is not a matter of luxury, it is a lifeline. Refusing to acknowledge that because it is not personally convenient to you is not only naive, but it is also politically reckless.

 

Data vs. Gut Feeling

The tech industry is a culture of intuitive, visionary thinking. But, intuition can quickly become prejudice. The data paints a different picture. For instance, global investments in edtech have increased and are projected to reach $404 billion by 2025. Those who did not see the potential because they hadn’t valued the concept of online learning are now seeing what they missed out on.

If you only rely on your lived experience, then you will lose track of macroeconomic and demographic trends. Data offers context that individual stories lack.

 

The Danger of Overconfidence

In business, overconfidence is confused with competency. When decision-makers reject possibilities based on a casual “I’d never use that,” innovation to serve another audience is foregone. What they really mean is, “If I don’t benefit from it, then it doesn’t count”. Not only is that bias, it’s arrogance.

 

Lessons From Markets Silicon Valley Ignored

Fintech in Emerging Economies

Silicon Valley has ignored fintech solutions for the underbanked for years. In Kenya, mobile money platforms such as M-Pesa revolutionized the economy by providing secure monetary platforms for individuals without access to banks. What was disconnected to investors who used to credit cards became vital to millions.

The success of M-Pesa illustrates one important reality – these kinds of markets often don’t resemble the lives of those running them. But that is precisely their value, to solve problems they don’t have.

 

Healthtech Beyond Insurance

Healthtech innovations such as telemedicine or mobile diagnostics are changing the way people can access care in countries with a lack of healthcare infrastructure. Though an insured investor in the U.S. might find mobile clinics comical, for patients in these vulnerable communities, they are a matter of life or death. Willful ignorance that these could be lifestyle-enhancing would be a very expensive mistake.

 

Edtech as Equalizer

Those who have gone to private schools will never understand the constraints to which the children from small, underfunded public schools have been exposed. But that is changing thanks to edtech platforms that are already providing affordable means of access to learning. This change was fast-tracked by the global pandemic, which affirmed that online education is not optional, but essential. On the other hand, the argument against edtech for the reason that “schools already exist” fails to see how edtech can provide an equitable platform for millions.

 

How to Guard Against Bias in Business

1. Ask Better Questions

Instead of asking “Would I use this?” ask “Who would need this the most, and why?” This shifts the lens of assessment from one of individual relevance to one of market viability.

 

2. Research Market Trends

Use credible data assets and market reports rather than instinct. These trends in consumption, technology and demographics quickly highlight latent opportunities that may be difficult to perceive at a personal or local level. Fintech startups in Africa, for instance, raised above $1.3 billion just in 2021, among many other evidence of the investor’s appetite and the market’s growth, according to Statista.

 

3. Diversify Perspectives

Echo chambers are fertile grounds for bias. Be surrounded by the wide range of voices, your colleagues, your advisors and your customers of different backgrounds. The experience which they have gained increases your knowledge about the markets that you are targeting.

 

4. Separate Self from Market

You should realize that your individual comfort/privilege does not negate the pain points of other individuals. A billionaire investor will never be concerned with remittances, but millions of migrant workers are concerned. The necessity they have provides a chance, no matter what happened to you.

 

5. Validate with Numbers

Market validation is based on measures of adoption, growth rates, and customer demand, rather than on your own view of the world. Base your choices on data, rather than anecdote.

 

Conclusion

The worst form of bias in business is thinking that the world is just like yours. Investors who overlooked fintech, edtech, or healthtech due to their own convenience were not only shortsighted but also blind to billions of dollars of potential opportunities. The case of Ike Eke with Beta Ventures demonstrates that when one leaves the comfort zone and believes the numbers, it is possible to find the unicorns when others would find them irrelevant.

The following billion-dollar concept is not going to be that one. It may not resolve an issue that you are going through. It may even sound to you as something unnecessary. But the market is not you. It is larger, wider and more varied than that of any single person.

The next time you are presented with an opportunity, take time to think about it first before you turn it down. Ask the right questions. Look at the numbers. Study the trends. The reason why you cannot see it in your world may be that it is the thing the rest of the world is waiting to see.