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What are the different kinds of cognitive biases in micro entrepreneurs?


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What do you say - What are the different kinds of Cognitive Biases in micro entrepreneurs? 

Imagine working with an opportunity entrepreneur in out-skirts of Tier-1 town. While working in the same shop, you get to observe this person closely – one's psyche, behavior, habits, actions and decisions. 

Would you find anything unusual and irrational? If yes, what would these irrationalities (in other words, Cognitive biases) be?  

Extensive research indicates that opportunity entrepreneurs have various cognitive biases. Some of them are discussed below – Sunk cost fallacy, Self-serving bias, Selective perception, Ostrich effect and Optimism bias. 
Sunk cost fallacy, Ostrich effect & Optimism bias

Due to sunk cost fallacy, you will find that Opportunity entrepreneur, whom you have been working with, will continue to complete things that one has already invested time and energy in spite of facing increasingly negative outcomes. Due to ostrich effect, you will find that person avoiding apparently risky financial situation by pretending it does not exist. And due to optimism bias, you will find that person to believe that one is at lesser risk of experiencing a negative event compared to others.

Selective Perception and Self-serving bias
Due to selective perception, you will find that this person tends to not notice (and more quickly forget) stimuli that causes emotional discomfort and contradicts prior beliefs. You will also notice that due to self-serving bias, this person tends to search for, interpret, favor and recall information in a way that confirms one's pre-existing beliefs or hypothesis.

Whether lender or government, understanding the psyche of both opportunity and necessity entrepreneur plays a key role in design of appropriate financial products, policies and last-mile implementation strategies. 
What do you say - What are the different kind of cognitive biases in micro entrepreneurs? We would love to hear your feedback
About Us: IMV facilitates loans to MSME and small scale industries in India through partner microfinance institutions, NBFCs and SFBs. IMV’s sister concern, Enable Livelihoods Foundation which is a social enterprise, has vast experience of working in space of rural development, skill development and social entrepreneurship. The founders, themselves being social entrepreneurs in India, have authored several publications on microenterprise and entrepreneurship.  

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Pranay Bhargava
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What are the different kinds of cognitive biases in micro entrepreneurs?


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