What Owners Can Learn from Each Other: Experience Instead of Advice

Why well-meant advice among owners so often fizzles out

At an association evening, an owner mentions that his best salesperson has quit. Within two minutes he hears three pieces of advice: more commission, a headhunter, take over sales himself. Each comes from someone who means well and has experienced something similar. The next morning he implements none of them, and probably rightly so.

Exchange with other owners is among the most valuable resources an entrepreneur has. The guide networking with a plan names information, referrals, and advice and support as the three returns of a network. Nevertheless, little remains of many conversations. This essay asks: What can owners actually learn from each other, and what must an exchange look like for this learning to succeed?

To answer it, I first clarify the difference between advice and experience, then present egocentric advice discounting as a thinking model, and look at field experiments on peer groups of entrepreneurs. After that I weigh two views and describe a case round that fits into any peer group.

Advice and experience: the difference

Advice is a recommendation of what someone else should do: “Raise the commission.” Experience is a report of what happened to oneself in a similar situation, what one did, and what came of it: “When my sales manager left, I raised the commission. The successor came but stayed only eight months because he lacked onboarding.”

The difference seems small but is fundamental. Advice transfers the other's judgment to my situation without my being able to check whether the situations are comparable. Experience provides the case with its circumstances, and I decide myself what fits me. It is information, not a judgment.

The place where this exchange happens most often is the peer group, in German an Erfa-Gruppe. The comparison business networks compared describes it like this: an Erfa-Gruppe, short for experience exchange group, is a fixed circle of owners who meet regularly to exchange confidentially about their businesses. The name already contains the answer to this essay's question.

The thinking model: egocentric advice discounting

Psychology has studied for decades how people take advice. Bonaccio and Dalal (2006) summarized this research. One finding runs through many experiments: people weight their own opinion more heavily than the advice of others, even when the advice comes from someone who knows better. Research calls this egocentric advice discounting. At the same time, the studies show that advice improves the quality of judgments on average. Whoever discounts it is thus giving something away.

There are several explanations for the discounting, all of which fit owners. One knows one's own reasons, but not those of the adviser. One considers one's own situation special. And whoever has run his business for twenty years does not like being told what to do. Bonaccio and Dalal also describe that advisers and decision makers often think differently: the adviser does not bear the consequences and more easily recommends what he would not do himself.

An insight follows from this model that shifts the problem. If advice is systematically discounted, there is little point in teaching owners to accept advice better. It makes more sense to design the exchange so that less needs to be discounted: through experiences whose circumstances are visible and which the listener assesses himself. Then the decision is his from the start.

An everyday analogy: whoever plans a hiking route gives little credence to the sentence “Take the left trail.” He gives more credence to the report “I took the left trail in October; after rain the descent was slippery and it took me an hour longer,” because he can compare it with his own date and weather.

Owners learn from each other not through recommendations but through cases they are allowed to assess themselves.

What field experiments show about peer groups of entrepreneurs

That exchange among entrepreneurs works is now supported by experiments, not just surveys. The best known comes from Cai and Szeidl (2018). They organized business associations for owners of young firms in China and randomly assigned 2,820 firms either to small groups whose owners met monthly for a year or to a control group without meetings.

The meetings raised revenue by 8.1 percent and also increased profit, the number of business partners, borrowing, and a score for management quality. The effect persisted one year after the meetings ended. Firms that had been randomly assigned better peers grew more. The pathway is particularly revealing: the owners shared business-relevant information, especially when they were not competitors. The meetings thus worked as a place of learning from others.

A second experiment shows why this learning does not arise by itself. Dimitriadis and Koning (2022) worked with a training program for entrepreneurs in Lomé, the capital of Togo. Some of the roughly 300 participants received a short training in social skills: asking others questions about their business, contributing their own experiences, collaborating. These entrepreneurs then formed connections with around 50 percent more peers, more often with complementary skills, and their monthly profit rose by about 20 percent. The authors attribute this to better connections and better advice.

Both studies have limits. They come from China and Togo, with young and small firms in markets where information is harder to access than in Germany. The size of the effects therefore cannot be transferred. The direction can: exchange works when it moves information, and it works better when the participants can ask questions.

Two views: seek advice or avoid it?

The first view says: owners should seek much more advice. They are alone at the top, their environment is reluctant to contradict them, and the experiments show measurable returns. The article mentoring for entrepreneurs describes what an experienced companion can contribute. Whoever avoids advice remains trapped in his own thinking errors.

The second view says: advice from other owners should be taken with caution. Every business is different, and what worked for one can harm another. Advisers do not bear the consequences and prefer to tell of their successes rather than their mistakes. The essay talking about failure shows why failure is rarely discussed openly, particularly in Germany. An exchange in which only successes appear teaches mainly overconfidence.

I consider both views right, and that is exactly why the form of the exchange matters more than its amount. The experiments suggest that conversation with other owners works. But they also show through what: through shared information and advice one could ask for. The caution of the second view mainly hits unsolicited advice. Whoever exchanges experiences instead of recommendations takes the edge off both objections: the listener gets information, and the narrator does not have to pretend he knows what the other should do.

The case round: a procedure for 60 minutes

From the model I derive a procedure that I call the case round. It suits peer groups, entrepreneur circles, and even a conversation among three. One owner brings an open question, and the others help him think it through. The rule that carries everything: there are no recommendations, only questions and experiences.

1. Describe the situation

   In ten minutes, the case giver describes his question, the circumstances, and what he has already tried. The others listen and take notes.

2. Questions only

   For fifteen minutes, the others may only ask questions that clarify the situation: figures, people involved, deadlines. No hidden advice such as “Have you ever considered whether …?”

3. Share experiences

   For twenty minutes, everyone who has experienced something similar reports in the form “For me it was like this …”: circumstances, what he did, what came of it, even if it went wrong.

4. The case giver decides

   Ten minutes: the case giver says what he takes away and what he will do next. Nobody comments on it.

5. Brief review

   Five minutes: what helped in the round, what did not? At the next meeting, the case giver reports what happened.

The procedure has a second effect that goes beyond the individual case. Whoever regularly reports on his own mistakes thinks them through more thoroughly himself. How to learn from bad decisions without looking for culprits is described in learning from bad decisions. How owners learn alongside everyday work is shown in learning as an owner.

The next step

• In your next conversation with another owner, notice how often you give advice and how often you talk about yourself.
• Formulate an open question from your business so that it can be described in ten minutes.
• Propose a case round following the procedure above to your peer group or to two owners you know.
• Bring to the round an experience of your own that did not turn out well.

Conclusion: What can owners learn from each other?

The opening question was
owners can learn from each other and what an exchange must look like for this to succeed. The experiments by Cai and Szeidl and by Dimitriadis and Koning show that exchange among entrepreneurs has a measurable effect, above all because information is shared and questions are asked. Research on advice taking explains why unsolicited advice contributes little: it is discounted, often for good reason.

Owners thus learn from each other less what they should do than what happened to others in a similar situation. An exchange that takes this seriously replaces recommendations with questions and experiences and leaves the decision to whoever must bear it. The best contribution in a round of entrepreneurs is rarely the cleverest advice. It is the most honest report.