Simulated Empathy Theory of Entrepreneurship
Have you ever wondered why some entrepreneurs seem to "just know" exactly what their customers want before the customers even know it themselves? The secret isn't magic; it's a cognitive process defined as the Simulated Empathy Theory of Entrepreneurship (SET).
SET suggests that successful entrepreneurs don’t just "feel" for their customers; they actively simulate their internal mental states to solve the "knowledge problem" of the market.
What is Simulated Empathy?
In their 2021 research, Packard and Burnham argue that entrepreneurs face a "Problem of Other Minds." Because you can never truly know someone else's internal experience, you must create a mental model of it.
Unlike emotional empathy (feeling what others feel), SET is a tactical application of Theory of Mind (ToM). It involves using your own mind as a proxy to run "simulations" of customer experiences, allowing you to predict their needs with clinical precision.
The Simulation Mechanic: Projection & Adjustment
The theory breaks the process down into two critical cognitive steps:
- Projection: The entrepreneur starts by imagining what they would want in a given situation.
- Adjustment: They then refine that initial guess by adding specific knowledge about the customer’s unique environment, culture, and constraints.
Key Principle 1: Solving the Knowledge Problem
Information about customer needs is often "sticky" and hard to find. Packard and Burnham suggest that simulated empathy acts as a bridge. By mentally "inhabiting" the customer's world, entrepreneurs can uncover frustrations that users haven't even articulated yet.
Case Study: Airbnb
The founders didn't just analyze data; they stayed in their own hosts' listings. By simulating the guest experience, they felt the hesitation and lack of trust guests experienced when looking at low-quality photos. This "simulated frustration" led to their most important early innovation: professional photography services for hosts.
Key Principle 2: Overcoming Projection Bias
The greatest risk in SET is Projection Bias—assuming the customer is exactly like you. To counter this, successful entrepreneurs must maintain high Cognitive Flexibility.
They must be able to switch between the "Entrepreneur Self" (focused on features and costs) and the "Customer Self" (focused on ease and value) rapidly. If the simulation isn't constantly updated with real-world data, the business will fail because it's solving a problem that only exists in the entrepreneur's head.
Key Principle 3: Calibrating the Simulation
Simulation is an iterative loop. Packard and Burnham emphasize that the best entrepreneurs are those who are most efficient at "debugging" their mental models through external feedback.
| Calibration Method | Impact on SET |
|---|---|
| Direct Observation | Adds real behavioral "data" to the mental simulation. |
| MVP Testing | Validates if the "simulated" reaction matches the real reaction. |
| Perspective-Taking | Reduces bias by forcing the mind to adopt foreign constraints. |
Conclusion: Empathy as a Hard Skill
The Simulated Empathy Theory moves empathy away from being a "soft" personality trait and into the realm of hard strategic tools. By mastering the ability to simulate the customer's internal world, you can move beyond guessing and start building products that feel inevitable to your market.
References
- Packard, M. D., & Burnham, T. A. (2021). Do we understand each other? Toward a simulated empathy theory for entrepreneurship. Journal of Business Venturing, 36(1), 106076.
