Too much optimism can hurt you as an entrepreneur

Over-optimistic entrepreneurs frequently ignore their market competitors, argues Rainer Zitelmann in his book The Wealth Elite.

by Rainer Zitelmann

One of the most successful entrepreneurs I’ve ever met says of himself, “As far as I’m concerned, the glass is always half empty.” Not half full. Half empty. That makes him an exception among entrepreneurs, but his rather pessimistic attitude is probably one of the reasons his company has been so successful for half a century in an extremely risky industry – real estate development. It’s an industry in which few companies survive anywhere near so long.

Optimism is a great quality. For entrepreneurs, it’s downright essential, because hardly anyone would start a business if they weren’t an optimist. But especially in difficult situations, too much optimism can also be really damaging.

Against the odds

Over-optimism can be defined as a tendency of individuals to think of themselves as above average in terms of certain traits or abilities, even if they are not.

As early as the end of the 1980s, the scientists Arnold C. Cooper, Carolyn Y. Woo and William C. Dunkelberg showed how widespread over-optimism is by drawing on a survey of 2,994 entrepreneurs who had just started their own businesses. Although about two thirds of businesses founded at this time in the United States failed within four years, 81 percent of the respondents put their personal odds for success at 70 percent or more, and 33 percent said their chance of failing was zero.

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