According to Bush at War by Bob Woodward, one of Secretary of Defense Donald Rumsfeld’s favorite quotes is from the Introduction to Pearl Harbor: Warning and Decision:
“There is a tendency in our planning to confuse the unfamiliar with the improbable… The danger is in a poverty of expectations, a routine obsession with a few dangers that may be familiar rather than likely.”
The so-called rear-view mirror kids make this type of mistake when they predict that sales of core routers will be X billion dollars in 2010 or that the U.S. budget deficit will be Y trillion in 2015.
Do we make these same mistakes in venture capital as well? Do we de-emphasize the non-linear market and competitive factors that can kill portfolio companies?