Decision Traps and Due Diligence
Almost 25 years ago, J. Edward Russo and Paul J.H. Schoemaker wrote "Decision Traps: The Ten Barriers to Brilliant Decision-Making and How to Overcome Them". I believe that the book is out of print, but there are plenty of used book sellers who have it.
Two of their decision traps are particularly prevalent amongst business opportunities or distributorship purchasers: a) overconfidence,"failing to collect key factual information because you are too confident in your assumptions and opinions., b) shortsighted shortcuts, relying inappropriately on "rules of thumb" such as implicitly trysting the most readily available information or anchoring too much on convenient facts."
Here is how these two decision traps end up cost purchaser a great deal of money. A person will attend a trade show and see an admittedly neat idea: it may be a new internet kiosk or atms located in casinos. The individual will self generate a great deal of excitement about the opportunity, forgetting that over optimism is only required for implementing a well researched out decision,and is no substitute for careful, skeptical and through examination.
Being over confident can be a good thing, but only after you have been more than skeptical, asked all the right disconfirming questions, and identified and removed the anchors in your assumptions.
Given this, does the the new FTC rule help, hinder, or is neutral with respect to purchasers of business opportunities?
The new Biz Op Rule will hinder rational decision making because the disclosure document will only be given to individual 7 days before they make the purchase, and will not be publicly available.
This means that purchaser will only have 7 days to perform the due diligence, and only after they have seen and bought the hype at the trade show. It is not wrong that the trade shows sell hype, that time of excitement is needed for individuals ready to implement a well thought out plan.
But nobody can possibly analyze the biz op plan in the seven days having already swallowed what might be the deadly koolaid.
