In the fast-paced and competitive world of entrepreneurship, advice can be a powerful tool for success or a potential pitfall. Recent research by Susan Cohen, Associate Professor, Terry College of Business at the University of Georgia, and Rembrand Koning, Associate Professor of Business Administration at Harvard Business School and Principal Investigator in the Tech for All Lab at the Digital Data Design Institute (D^3) at Harvard, explores the complex dynamics of entrepreneurial advice through the lens of Bayesian learning 1. In their working paper, “Advice and the Bayesian Entrepreneur,” Cohen and Koning shed light on why entrepreneurs often struggle with seeking and incorporating advice, despite its potential value, and offer insights into how to maximize the benefits of external guidance in the startup journey.
Key Insight: The Paradox of Entrepreneurial Advice Aversion
“A decade of research has documented that entrepreneurs fail to seek, receive, and listen to advice, despite the fact that advisors are both willing to provide advice and the advice they provide is often valuable.” [1]
Cohen and Koning’s research reveals a paradoxical behavior among entrepreneurs: they often avoid seeking advice, even when it could be beneficial. This reluctance can stem from an entrepreneur’s strong beliefs in their ideas, which can lead to confirmation bias and premature satisfaction with their current strategies and may prompt them to view advisors as overly pessimistic. On the other hand, entrepreneurs with low conviction in their ideas may not see a reason to seek advice. For example, the founder of Framebridge, Susan Tynan, initially received negative feedback from investors who were unfamiliar with the framing industry, illustrating how entrepreneurs may encounter biased or uninformed advice early in their journey.
Key Insight: The Power of Diverse Perspectives in Theory Development
“Advice is especially valuable because the different priors [or beliefs] and mental models of an advisor can help the entrepreneur evaluate aspects of their strategy that are difficult to assess otherwise.” [2]
Cohen and Koning emphasize the importance of diverse perspectives in shaping entrepreneurial theories. Advisors with different backgrounds and experiences can help entrepreneurs identify blind spots and consider alternative strategies they might not have thought of on their own. For example, when Rent the Runway founders approached designer Diane von Fürstenberg, her years of experience enabled her to consider an alternative focus for the startup. Her insight drove a crucial pivot in their strategy to position dress rentals as a marketing channel for younger, aspirational customers rather than a potential threat to designers’ sales.
Key Insight: The Risks of Correlated Advice and Echo Chambers
“Precisely because advice is cheap and easy, advisors often learn from each other, study the same business cases, and often share experiences from working in the same firms. As a result, what appear to be two independent sources of information are not.” [3]
The authors caution against the dangers of relying on advice from a homogeneous group of advisors. When entrepreneurs seek guidance from individuals with similar backgrounds or experiences, they risk creating an echo chamber that reinforces existing beliefs rather than challenging them. For example, Framebridge’s initial strategy of heavily investing in expensive robots for automation was based on advice from a group of tech executives with similar backgrounds, and produced significant losses. (Later, founder Susan Tynan sought advice from a manufacturing executive, who suggested custom—rather than robot—manufacturing, which boosted profits and growth.)
Key Insight: Advice as a Catalyst for Efficient Experimentation
“[A]dvice can both broaden an entrepreneur’s theories and allow entrepreneurs to quickly test and iterate on their beliefs. With more developed priors and better theories, entrepreneurs can design and run more informative experiments.” [4]
Cohen and Koning argue that well-structured advice can significantly improve the experimentation process for entrepreneurs. By helping to refine theories and identify critical areas for testing, advisors can guide entrepreneurs toward more efficient and effective learning cycles. For example, in the case of Hotmail, advice from venture capitalist Tim Draper led to the addition of a simple tagline, “Get your free email at Hotmail,” to every outgoing email. This line became a powerful viral marketing strategy that attracted 30 million customers in less than 3 years.
Why This Matters
Understanding the complex dynamics of entrepreneurial advice is crucial for startups. For entrepreneurs and executives, recognizing the potential biases in their own thinking and actively seeking diverse perspectives can lead to more robust strategies and increased chances of success. For investors, mentors, and accelerator programs, this research underscores the importance of structuring advice networks to maximize learning while minimizing the risks of groupthink and overconfidence. To provide scale to advice networks, the authors suggest research into using generative artificial intelligence (AI) tools as “artificial advisors” programmed with different priors, data, and mental models. This would help to increase the availability of diverse, high-quality advice to entrepreneurs, especially in areas where access to experienced human advisors may be limited.
Footnote
(1) In entrepreneurship, the term “Bayesian” describes an iterative approach where entrepreneurs start with initial beliefs (or priors) that are guided through theorizing, experimentation, and choices. As they gather new information (including through advice), entrepreneurs update their priors, refining their beliefs and theories, and adjusting their strategies accordingly.
References
[1] Susan Cohen and Rembrand Koning, “Advice and the Bayesian Entrepreneur”, Harvard Business School Working Paper, No. 25-029 (2024), 4.
[2] Cohen and Koning, “Advice and the Bayesian Entrepreneur”, 6.
[3] Cohen and Koning, “Advice and the Bayesian Entrepreneur”, 9.
[4] Cohen and Koning, “Advice and the Bayesian Entrepreneur”, 10.
Meet the Authors
Susan Cohen is an Associate Professor in the Department of Management at the Terry College of Business at the University of Georgia. She earned her PhD in Strategy and Entrepreneurship from the University of North Carolina at Chapel Hill, her MBA in Entrepreneurship from the Kellogg School of Management at Northwestern University, and her BA in Mathematics from the University of Michigan. She is also the Associate Editor of the Strategic Management Journal.
Rembrand Koning is an Associate Professor of Business Administration at Harvard Business School. He is the co-director, co-founder, and a Principal Investigator in the Tech for All Lab at D^3 at Harvard, studying how entrepreneurs can accelerate and shift the rate and direction of science, technology, and artificial intelligence (AI) to benefit humanity. He earned his PhD in Business from the Stanford Graduate School of Business and his BS in Mathematics and BA in Statistics from the University of Chicago.