2025-06-03 [[Question 3.pdf]] using [early stage venture value proposition cld](https://claude.ai/chat/f986fbc7-8519-4df9-8ded-eeaebcc6f7ce) i connected with [[tom_griffith]]'s description of bounded rationality and bounded optimality. matches with my expectation of thinking (acting) partner |**Aspect**|**Economics Mixing**|**Resource Rationality Mixing**| |---|---|---| |**What to mix**|Biased beliefs with objective priors|Private benefits with stakeholder utilities| |**How to mix**|Cognitive training/correction|Systematic validation design| |**Entrepreneur role**|Should become less optimistic|Can remain optimistic but use better tools| |**Outcome**|"Rational" probability assessment|Informed decision despite optimism| ## **Two Paths to the Same Goal: Breaking Entrepreneurial Isolation** ### **Economics Approach: Mixing Through Debiasing** - **Goal**: Mix entrepreneur's subjective beliefs with "objective" market priors - **Mechanism**: Training, education, bias correction - **Formula**: `p_corrected = α·p_entrepreneur + (1-α)·p_market` where α → 0 (reduce entrepreneur weight) - **Arora's critique**: "Common priors may be unrealistic but abandoning them opens too many degrees of freedom" ### **Resource Rationality Approach: Mixing Through Design** - **Goal**: Mix entrepreneur's perspective with stakeholder utilities while respecting constraints - **Mechanism**: Cognitive augmentation tools (dual validation) - **Formula**: `Decision = f(entrepreneur_utility, customer_utility, resource_partner_utility)` - **Our contribution**: Systematic mixing without requiring entrepreneurs to abandon optimism ## **The Mixing Insight Applied to Dual Validation:** ### **Traditional Mixing (Economics)** ``` Entrepreneur belief → Training → Market belief (Single perspective) → (Correction) → (Shared perspective) ``` ### **Systematic Mixing (Resource Rationality)** ``` Entrepreneur optimism + Customer utility + Resource partner utility → Dual validation (Private perspective) + (Market perspective) + (Operational perspective) → (Integrated decision) ``` ## **Tesla Example as Mixing Mechanism:** - **Entrepreneur perspective**: "Electric cars can outperform traditional sports cars" - **Customer mixing**: "Do luxury buyers actually want electric performance?" - **Resource partner mixing**: "Can Lotus+Xcellent+Chroma actually deliver this?" - **Result**: Systematic mixing of three utility functions without "debiasing" Elon's optimism ## **Updated Theoretical Framework:** |**Aspect**|**Economics Mixing**|**Resource Rationality Mixing**| |---|---|---| |**What to mix**|Biased beliefs with objective priors|Private benefits with stakeholder utilities| |**How to mix**|Cognitive training/correction|Systematic validation design| |**Entrepreneur role**|Should become less optimistic|Can remain optimistic but use better tools| |**Outcome**|"Rational" probability assessment|Informed decision despite optimism| ## **Why This Matters:** Both paradigms recognize that **entrepreneurs in isolation make poor decisions**. The disagreement is: - **Economics**: "Fix the entrepreneur's thinking" - **Resource Rationality**: "Fix the entrepreneur's information processing tools" **Dual stakeholder validation achieves mixing through design rather than debiasing** - it systematically forces integration of multiple utility functions without requiring entrepreneurs to abandon the optimism that drives them to start ventures in the first place. This makes our approach more **implementable** because it works WITH entrepreneurial psychology rather than against it.