Trust your selves — both of them
The conscious and the subconscious in Soft Due Diligence
Saint Clair · Soft Due Diligence | November 2023
The practised investor reads with two minds. The rational mind asks the documented questions, takes the financial measurements, weighs the legal architecture. The second mind, which the working language calls gut feel, registers patterns the rational mind has yet to articulate. Soft Due Diligence is the institutional discipline of using both — and of saying, in language the institution can audit, what each mind contributed to the decision.
The published research is consistent on the second mind’s importance. M&A deal teams that examine soft factors intentionally and systematically realise post-deal synergies at materially higher rates [1]; venture capitalists who attend to soft factors close more successful investments [2]. The relevance is sharpest where tangible data is thin: early-stage venture investments, allocations to first-time funds, secondary transactions where the principal’s narrative is the documented basis for the price.
What is actually happening when a practised investor reads soft factors well? The answer carries two layers. The first is the rational floor: knowing where to look, planning ahead to see the whole picture, treating the reading as a method an institutional body can teach and audit. The discipline rests on it. The second layer is the working subject of this article.
The Venture Capitalist’s Magical Powers
Venture capitalists tend to define themselves by the ability to find a good deal. Most of them, when asked how they do it, do not have a clear answer. The available research [3] confirms that VCs largely do not understand their own decision-making process — and are largely comfortable with that.
“Gut feel” is the most common explanation. The phrase carries a useful aura: an additional capability, intuitive, exempt from logical accounting, available only to those who have it. The aura is convenient. Subsequent research [4] shows VCs are notably poor at introspecting on their own decisions; the gut-feel explanation is at least partly a defence against the difficulty of the introspective work.
Laura Huang’s 2015 work in Administrative Science Quarterly [5] examined investor decision-making at length and arrived at a precise account: gut feel is the joint product of accumulated experience and emotional weight, recognising patterns the conscious mind has yet to articulate. The aura around the phrase is older than the research. The cognitive register beneath it has been there all along.
Two systems, two roles
Daniel Kahneman’s Thinking, Fast and Slow [6] gives the cleanest map of the cognitive architecture at work. The mind operates two systems. System 1 is the bank of pre-configured routines that handle the mental work of daily life: the instant answer to one plus one, the recognition of a familiar face, the feeling that something is off in a conversation before the rational mind has named it. System 2 is the slower, effortful machinery that solves problems System 1 has yet to build a shortcut for. Asked to compute 178,262 divided by 512, most readers will pause, narrow their visual field, breathe differently, perhaps mutter under their breath: System 2 has been recruited, and it costs.
When System 2 has solved a particular problem often enough, the brain packages the procedure for handover to System 1. The next time the problem appears, the answer arrives without effort. This is part of how learning works.
It is also part of how biases form.
A System 1 shortcut is fast because it accepts approximate matches: a situation that resembles the trained one well enough is processed as the trained one. The match is tolerant by design — the alternative would render the shortcut useless. The tolerance is also how the wrong answer arrives confidently. I have seen this a thousand times, I know what to do is sometimes accumulated wisdom and sometimes the law of the instrument: with a hammer in hand, every problem looks like a nail.
The investor who relies on System 1 alone is fast and frequently wrong. The investor who relies on System 2 alone is slow and exhausted. The practised reader uses both.
The dissonance signal
How does the mind know that a situation needs the slower system? One of the cleanest accounts comes from Leon Festinger’s A Theory of Cognitive Dissonance [7]. The mind, Festinger argues, runs on a kind of background consonance check: as long as the perceived world fits the expected world, attention can stay on autopilot. When something does not fit, attention is recruited.
The motorway is the everyday illustration. A practised driver covers a long stretch with little conscious attention; System 1 handles the lane discipline, the speed, the spacing. Twenty kilometres later the driver may briefly wake to the question of how the previous twenty kilometres were driven at all — apparently unconsciously, at high speed, and without incident. The answer: by System 1, competently. Now insert a car drifting unpredictably between lanes ahead. The dissonance is immediate. System 2 fires up; the rational analysis kicks in; the driver is fully present, alert, and ready to react.
In a venture investment evaluation, the dissonance signal arrives often. The financial projections do not match the roadmap. The team’s account of the market does not match the customer interview transcripts. The founder’s calm answer to a question carries something the rational analysis has yet to name. Each of these is a System 2 trigger. The discipline of Soft Due Diligence is in part the discipline of taking those triggers seriously.
The second self
The part of the mind that runs the consonance check while the rest of attention is elsewhere has had several names. C. G. Jung’s account, articulated in the early twentieth century, is one of the durable answers. Jung described the subconscious as a distinct cognitive instance, drawing on personal experience but also on inherited and collective patterns. Where the conscious mind reasons, the subconscious monitors, registers, and signals.
The proposition raised controversy in its time, and psychology has spent more than a century qualifying Jung’s propositions. The model holds nonetheless as a useful working description of an observable competence. What Huang names gut feel is, in this reading, at least in part the conscious surface of subconscious work: pattern recognition informed by accumulated personal experience and, in Jung’s account, by the longer experience the species carries. The subconscious is also a candidate for the monitoring instance the dissonance signal recruits: a background process registering inconsistency before the rational analysis catches up. The discipline borrows from the cognitive sciences ruthlessly and bends what it borrows into a shape that does the work Soft Due Diligence asks of it; psychologists have not been harmed in the working.
The palaeolithic illustration restates this. A rustle in the leaves at the edge of vision; an uptick in adrenaline; a feeling of unease before any predator has shown itself. The second self has noticed something while the conscious mind attends to the meal at hand. Long before the sabre-tooth tiger emerges, the body knows. When the tiger does emerge, all systems power up at once: fight, flight, or — the option modern conditions tend to disfavour — freeze. The discipline of trusting both selves is older than the species that articulated it.
Restoring consonance, deliberately
Festinger’s model goes one step further. Cognitive dissonance prompts action: the mind tries to reduce the inconsistency, either by changing the perception, by adding consonant elements, or by adjusting the underlying belief. In practice, the action is fast and frequently invisible. The startup founder offers a plausible reconciliation between the financial model and the roadmap, and the dissonance dissipates. The rustle in the leaves was a passing animal. Alert ends.
For the investor, the speed of the resolution is the risk. The whole dynamic — dissonance, attention, resolution — can run to completion before the conscious mind has noticed it ran at all. The reading is over before the reader has registered there was a reading. What the second self caught, the first self has already explained away.
The discipline is to slow that process down. To pause long enough to ask where the dissonance came from. To treat the unease as data before allowing the rationalising mind to file it. The vocabulary helps: I do not feel this thing, in French — je ne le sens pas, ce truc — the working colloquial framing for the cognitive event the academic literature describes more elaborately. The feeling sits somewhere in the body. It carries information.
Making it intentional
The practical discipline is short.
First, listen. In a working culture that defaults to rationality and quantification, the emotional register is undertreated. Feelings are a parallel evidentiary stream. The accumulated experience of the second self is worth admitting to the conversation.
Second, follow the dissonance signal consciously. When the unease registers, ask where it came from. Sometimes the trigger is easy to identify: a phrase, a contradiction, a transcribed account that does not match the documented one. Sometimes the trigger is harder to surface, and the right move is to step away from the desk. Take a walk; replay the meeting in mind; let the conscious attention defocus. The trigger often surfaces when the mind is permitted to wander. This is the same cognitive geometry artists and designers use; nothing exotic about it.
Third, write it down. The reading discipline written down is the reading discipline audited; the institutional reader’s authority depends on auditability. The framework, the weights, the surprises, the resolution: these are the artefacts the second self has produced and the first self has integrated. The act of writing forces the integration to be explicit.
The discipline of Soft Due Diligence puts both cognitive registers to work. The rational analysis and the second self are two evidentiary streams, and the institutional table seats both. The discipline gives the institution language to audit what each register contributed to the decision.
The investor who refuses the second self is leaving a fully accredited cognitive partner outside the room.
Sources: References as numbered citations above. Originally published 3 November 2023 on softduediligence.com under the title Trust your selves – both of them: The Role of Conscious and Subconscious Cognitive Processes in Soft Due Diligence. Revised and republished under Saint Clair editorial, 2026.
Disclaimer: This article is for informational purposes only and does not constitute investment or business advice. All decisions should be made based on independent research and consultation with qualified advisors.
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