The first principle is that you must not fool yourself—and you are the easiest person to fool. So you have to be very careful about that. After you’ve not fooled yourself, it’s easy not to fool other scientists. You just have to be honest in a conventional way after that.
I am not going to go into much details about what he might mean, i will give first a possible explanation of what he wanted to say. Then i give my understanding of the quote in a business context.
The first principle is that you must not fool yourself, and you are the easiest person to fool
Richard is a scientist, and in science we need to be very careful with interpreting data. I was a scientist myself, and indeed, we have an ethical obligation to seek the truth, and avoiding convincing ourselves of our own theories. In science, there is a process of peer review, that have specifically this objective of checking experiments results and data, and requiring an experienced analysis of the results and assumptions.
Essentially, this quote call you to pursue the truth by following where the data lead, without allowing your wishes and preconceptions to shade your analysis and subtly influence the data’s interpretation. To guard against this requires actively seeking all alternative explanations, and engaging with those who disagree with you. Finding the right answer is hard, while fooling yourself into believing what you want to believe is easy.
From a business point of view:
It mainly applies for businesses or startups that are performing bad or that are based on a bad idea. I am not a proponent of failing fast, instead i prefer cockroach approach and grind. However, in many cases where the issue starts at the idea stage, it is better to just give up or eventually pivot instead of investing time and energy into a bad idea. Here You should avoid to fool yourself about the viability of a business, and you should look at the situation from different perspectives. For this avoid getting stuck in an echo box and seek constructive criticism.