How can investors keep emotion from distorting their investment decisions?

Martin Casado · published Dec 5, 2022

The two main challenges of investing are getting emotion out of decisions (especially follow-ons) and the unconscious principal-agent problem within a team

It is easy to fall in love with a company when making follow-on decisions, and people will do what is best for their own careers even without meaning to

42:23 Getting emotion out of follow on decisions and managing the unconscious principal agent problem are investings two main challenges

Danny Rimer · published Jun 17, 2024

The only way to keep emotion out of investing is to keep your past mistakes and your firm's true north front of mind and let your partners keep you honest

52:13 Keep past mistakes and firm true north in mind and rely on partners for honesty

Paul Graham · published Apr 2007

Investors are far more emotional than people expect; investment negotiations easily turn personal and offended investors will walk away.

Possibly their position of power or the large sums involved make them this way.

source Investors are more emotional than expected and negotiations can turn personal causing walkouts

Paul Graham · published Apr 2007

VC behavior such as issuing exploding termsheets when a rival firm shows interest has no rational basis and resembles high-school social dynamics rather than fiduciary calculation.

A firm that believed the startup was worth funding should welcome a rival's rejection; instead they refused to invest if the rival passed, because they couldn't stand taking a rival's rejects.

source Exploding termsheets triggered by a rivals passing reflect emotional not fiduciary logic