The two most popular words among experienced businesspeople, Brian Tracy notes in “Get Smart!”, are “due diligence.” This phrase captures a fundamental truth about success: the biggest mistakes we make come from committing time, money, and resources without having done sufficient homework.
According to Forbes magazine, the number one reason for business failure is simple: there’s no demand for the product or service. Customers don’t want it or won’t pay the price necessary to keep the company viable. In 2013 alone, more than $8 billion was spent on market research in the United States trying to prevent this exact problem. Yet despite exhaustive research, 80 percent of new products eventually fail.
The reason? Even with extensive information gathering, companies often ask the wrong questions, make unwarranted assumptions, or fail to truly understand their customers. The difference between informed and uninformed thinking isn’t just about having data – it’s about having the right data, asking the right questions, and rigorously testing your conclusions.
Get the Real Facts
Harold Geneen, who built ITT into a conglomerate of more than 150 companies, emphasized one principle above all: “The most important elements in business are facts. Get the real facts, not the obvious facts or assumed facts or hoped-for facts. Get the real facts. Facts don’t lie.”
This sounds obvious, but most people don’t actually do it. They settle for convenient facts, readily available facts, or facts that support what they already want to believe. Real facts – the ones that actually determine outcomes – often require significant effort to uncover.
Tracy identifies the core discipline of informed thinking: “Never assume. When you get a good idea, immediately take action to validate it, to gather proof that it is really as good as you think it is.”
Validation is the key word. Ideas feel good. They’re exciting. They promise solutions to problems or paths to success. But feelings aren’t facts. Most good ideas turn out to be wrong when subjected to rigorous testing.
The scientific method applies here: create a hypothesis, then actively try to disprove it. This is the opposite of what most people do – they fall in love with an idea and then seek confirmation that it’s brilliant.
The Hypothesis Testing Framework
Tracy recommends a counterintuitive approach borrowed from science: create a negative hypothesis and try to prove it.
If your idea is that there’s strong demand for a new product, don’t ask potential customers if they’d buy it. Instead, frame it negatively: “Of course, this is not something that you want, need, or are willing to pay for, is it?”
If the customer agrees – “You’re right, I don’t want that” – you’ve gained valuable information. If they counter your negative framing – “No, actually, this is exactly what I need” – you’ve validated demand in a much more reliable way than if you’d simply asked them to confirm your hopeful hypothesis.
This method works because people naturally want to be agreeable. Asked if they’d buy something, many say yes to avoid disappointing you or because it sounds good in theory. But confronted with the negative framing, they’re more likely to give you honest feedback.
“Be prepared to try and fail, to propose and be rejected, over and over,” Tracy advises. Failure and rejection are part of the validation process. They’re not obstacles to success – they’re essential inputs for informed thinking.
Ask the Brutal Questions
Tracy recommends becoming your own management consultant, asking the hard questions that expose weaknesses in your thinking:
“Is there a market demand for this new product or service?” “How big is the demand, and at what price?” “What changes would you have to make to make this attractive enough that people would buy it in sufficient quantities?” “Is the demand large enough to justify developing this product rather than something else?” “Is the market concentrated enough that you can reach potential customers with current marketing and sales channels?” “Will customers pay enough to earn a greater profit than with other products or services?”
Most people ask softball questions because they want to hear positive answers. Informed thinking requires asking questions that might kill your beloved idea. As Zig Ziglar said, “If you are hard on yourself, life will be very easy on you. But if you insist on being easy on yourself, life will be very hard on you.”
The Power of Expert Knowledge
One of Tracy’s most practical recommendations is simple: hire an expert. “One person who specializes in a particular area can save you a fortune in lost time and money.”
This goes against the bootstrapping mentality many entrepreneurs embrace – the idea that you should figure everything out yourself to save money. But informed thinking recognizes that expertise is worth paying for.
Experts have pattern recognition developed through years of experience. They’ve seen similar situations before. They can immediately identify holes in your reasoning or problems you haven’t anticipated.
Tracy uses the example of chess masters who can defeat thirty opponents simultaneously. They’re not thinking more moves ahead than less skilled players – they’re recognizing patterns on each board that years of experience have made familiar. They know what works and what doesn’t in similar configurations.
The same applies in business and the professions. “Because of extensive experience, which cannot be gained quickly or easily, the expert can rapidly assess a complex situation and immediately suggest a solution that was simply not obvious to a person with less experience.”
Experience Versus Inexperience
Nothing replaces experience in fast-moving, rapidly changing environments. Certain invaluable lessons can only be learned through trial and error, through countless experiences and innumerable mistakes.
This creates a paradox: you need experience to think informedly, but you can’t get experience without making the mistakes that come from thinking uninformedly. The solution is to accelerate your learning by studying others’ experiences, hiring people who have the experience you lack, and failing fast and cheap rather than slow and expensive.
Tracy emphasizes that pattern recognition – the ability to see similarities between current situations and past outcomes – comes only from experience. “Experienced people develop what is called pattern recognition. When they are exposed to a new or existing business situation, they can identify patterns that they have seen before that led to either success or failure.”
This is why mentorship matters. You’re not just getting advice – you’re getting access to someone else’s pattern recognition library, accumulated over decades.
Don’t Lose Money
Bernard Baruch, one of the richest self-made men in America, wrote in his autobiography that his biggest financial mistakes came from failing to do sufficient due diligence before investing. Warren Buffett, the world’s second-richest self-made multibillionaire, spends roughly 80 percent of each day reading and gathering information to inform his investment decisions.
The pattern is clear: wealthy people are obsessive about information gathering. They never stop learning. They continuously seek new data that might affect their decisions.
Tracy identifies this as the primary strategy of the rich: “Your goal should be to become better informed than anyone else in those areas of business and life that are most important to you. You do this by continually gathering information and comparing different ideas. You remain skeptical and proceed slowly toward your decisions.”
Rule number one in business and life: don’t lose money. The way you avoid losses is by making informed decisions based on thorough research and rigorous analysis.
The Validation Process
Tracy outlines a systematic approach to becoming informed before making major commitments:
Think on paper. Make a list of all the information you have about the product or service and all the information you’ll need to make the right decision. Writing forces clarity and reveals gaps.
Talk to other people. Seek advice from those who have been in similar situations. Their experience becomes your data.
Hire an expert. Specialists can save you fortune in lost time and money by helping you avoid predictable mistakes.
Do a Google search. Much of what you need to know is already available if you take time to research it. Often others have already tested similar ideas.
Solicit opinions. Ask everyone who might have relevant knowledge to share their candid views. One observation can completely change your perspective.
The key is systematic gathering of information from multiple sources, with a particular focus on those who have direct experience with similar situations.
The Hidden Flaw
J. Paul Getty, once the richest man in the world, had a distinctive approach to business decisions. He would first determine whether something was a good opportunity. Then he would ask: “What is the worst possible thing that could happen to us in this business opportunity?”
Having identified the worst case, Getty would “go to work to make sure that the worst possible outcome does not occur.”
This is informed thinking at its finest – not just gathering positive information about upside potential, but specifically seeking the hidden flaw that could destroy you. Every business opportunity has one. Every investment has a weakness. Every strategy has a vulnerability.
Uninformed thinkers ignore these or assume they won’t matter. Informed thinkers identify them explicitly and develop plans to mitigate them.
Knowledge Versus Assumptions
One of the simplest but most powerful questions Tracy recommends asking repeatedly is: “How do we know this is true?”
Most business decisions rest on assumptions presented as facts. Market size projections. Customer preference claims. Competitive analysis. Cost estimates. Revenue forecasts. Most are educated guesses at best.
Informed thinking requires distinguishing between what you actually know and what you’re assuming. When you catch yourself making an assertion, stop and ask: “How do we know this is true? What evidence supports this claim? What would disprove it?”
This discipline prevents the confirmation bias that dooms most failed ventures – the tendency to seek information that supports what you already believe while ignoring or dismissing contradictory evidence.
The Cost of Information
Gathering information costs time and often money. This creates pressure to shortcut the process and make decisions based on incomplete data.
But as Tracy points out, the cost of bad decisions far exceeds the cost of thorough research. “One new or unconsidered idea can make or save you a fortune.”
Don’t be cheap about gathering information. The few hundred or thousand dollars you spend on expert advice or market research is trivial compared to the tens or hundreds of thousands you might lose on an uninformed decision.
Similarly, the days or weeks you invest in due diligence seem long when you’re eager to move forward. But they’re nothing compared to the months or years you’ll spend dealing with the consequences of a bad decision made in haste.
When Good Information Prevents Bad Decisions
Tracy shares numerous examples of how informed thinking prevents disaster. The dog food company that invested millions developing nutritionally perfect dog food – only to discover that dogs hated it. The product was perfect on every dimension except the one that mattered: actual customer demand.
This happens constantly in business. Companies develop products that solve problems customers don’t have. They enter markets without understanding the competitive dynamics. They make assumptions about customer preferences that turn out to be completely wrong.
The cure is always the same: talk to customers earlier and more often. Test assumptions rigorously. Seek disconfirming evidence. Ask people to tell you why your idea won’t work, not why it will.
The Takeaway
Informed thinking requires discipline, patience, and often financial investment in information gathering. It means asking hard questions that might kill ideas you’re excited about. It means hiring experts even when you think you can figure it out yourself. It means testing and validating assumptions rather than assuming they’re correct.
As Tracy writes in “Get Smart!”, the biggest mistakes come from insufficient homework. The best decisions come from exhaustive due diligence. The difference between success and failure often comes down to whether you were willing to do the hard, unglamorous work of becoming truly informed before committing.
“The more information you gather and the more experience you accumulate, the better the decisions you will make and the better the results you will achieve.”