Pessimistic people are more likely to be successful entrepreneurs

Researchers advise optimists to work for others rather than themselves to avoid disappointment

Olivia Petter
Thursday 04 October 2018 17:02 BST
Scott Rudin Productions/The Social Network
Scott Rudin Productions/The Social Network

What does it take to be a successful entrepreneur today?

While certain traits like discipline, passion and dedication might help you on your path to professional prosperity, new research reveals the true secret to success is something much more personal: whether you're the glass half full or a glass half empty type.

According to a study published in the journal European Economic Review, optimistic thinkers who are self-employed are more likely to suffer from financial failure due to having unrealistic prospects.

Meanwhile, the opposite is true for pessimists.

The authors claim their findings could help explain why only 50 per cent of UK businesses survive the first five years.

To gather their findings, they examined data from the British Household Panel Study - a major longitudinal study - which tracks subjects across 18 years.

This includes information on 618 self-employed individuals, who were asked to forecast their income for the next year, something which was then compared to what their income actually was.

Their predictions were made before they became self-employed i.e. whilst they were still employees and had not yet entered the world of entrepreneurship.

By measuring the average gap between forecast and realisation, researchers were able to measure levels of optimism.

They found that pessimists - those whose forecasts did not match their realisations - earned 30 per cent more than optimists.

“Our results suggest that too many people are starting business ventures, at least as far as personal returns are concerned,” explains co-author Dr Chris Dawson, associate professor in business economics at the University of Bath.

“As a society we celebrate optimism and entrepreneurial thinking but when the two combine it pays to take a reality check.”

Dawson went on to cite BBC’s popular series Dragon’s Den, in which contestants present their business ideas to a panel of investors, as an example of such “wishful thinking”.

“Pessimism may not generally be seen as a desirable trait but it does protect people from taking on poor entrepreneurial projects," he continued.

However, that’s not to say all aspiring entrepreneurs should start wearing all-black and speaking exclusively in defeatist terms.

Speaking to to The Independent, co-author David de Meza of the London School of Economic explains that the study’s definitions of pessimism and optimism differ from those used in psychology, which largely describes an upbeat mood.

Here, the definition may not necessarily have anything to do with a person’s disposition as it derives exclusively from how much money they think they will earn versus how much they actually earned.

However, having a positive attitude in general could lead you to take professional risks that pessimists would typically reject, de Meza adds, which could work to your advantage in some cases.

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