Every day we are thrown in a perpetual whirlwind of emotions from experiences past. How you (subconsciously) decide to interact with the world begins with the memory of how you felt in a particular experience. And anytime you recall this memory it can set a precedence for how you make future decisions.
People in general are optimistic. If we weren’t, we wouldn’t take flights on planes. We wouldn’t drive our cars or smoke cigarettes. Optimistic bias tells us that we tend to believe that the odds will sway in our favor, even when history tells us differently. Experts place the failure rate of startups around 90%. For every example of a successful business you can find, there are several others that never made it – and further, the many more ideas that predate them, that live and die in the minds of their owners.
If I was completely rational I wouldn’t have started a cafe. While there aren’t any official reports, the rate of success is fairly bleak – and should have discouraged the lenders, landlords, my business partners, and I from even making the attempt as beginning restaurateurs. We shut down after one and half years. Yet, we still made the leap, in faith, with eyes completely open, confident that our Haitian burritos, Mango Magic smoothies, and worldly-inspired decor would make us a hip, foodie destination in the cozy neighborhood of Hermon. Our over-confidence led to underestimating the process. And that’s where many entrepreneurs fail.
Thinking back, I remember expressing concern to my business partners that we weren’t ready. But, I bought into the narrative that we could “make it work” and so we collectively decided that our optimism would guide us to profitability. At that moment rationality was traded for emotion, and thus became the primer of how we made decisions moving forward.
In entrepreneurship, optimism can create a false sense of security that encourages one to commit to a culture of ignorance about their business.
Optimism is what drives people to not work on a business plan, not spend enough time learning about their business, and make irrational, progress-killing decisions, that end in a failed business and a jaded entrepreneur. If you don’t have an unwavering sense of urgency about your startup, that keeps you up night after night, you might be too optimistic and dismissing real challenges that separate you from success and failure. Being cognizant of our propensity to view the world through rose-colored glasses is the first step in making purposeful, sound decisions that inch us closer to our goals. A sense of urgency is our minds communicating to our bodies that we’re thinking rationally.
Part of the reason optimism is so effective is that it’s painless, literally. When you understand this, you might come to the conclusion that most startups aren’t initiated by super zealous risk-takers, but rather those who haven’t experienced the gift of defeat.
When my business partners and I closed our cafe, only two of us decided to try another business – nearly immediately after we dissolved the partnership. The remaining partners were so jaded from the experience that they went back to their desk jobs; promising to never upset their spouses again by “playing with the family’s finances”. We had felt the Pain of failing a business.The prospect of launching a successful business now had to be considered more carefully. The Pain forced us to input reason into our emotional decision-making. This relates to why one of my favorite Shark Tank sound bytes, “you gotta have skin in the game”, is completely necessary.
You need to have something to lose for something to gain.
Reduce the risk of emotional decision-making in your business by simply investing in your business. If your mindset, for example, is to use as little of your own money to start your business, you might be projecting your own insecurities with regards to your ability to run that business.
Take ownership of the process, not just the idea. The idea helps us envision the future of our business. The process is what will take us there. Condition your mind to be critical of your business, so that you are constantly analyzing your business and developing strategies to crush your competition. As you go through this process, you will realize a genuine confidence, that is rooted in a history of overcoming obstacles and learning. This is why confidence trumps optimism, every time.
They say the rational mind is not good at being rational, but rather good at rationalizing what the emotional mind has already decided.
Here is a simple exercise you can use to make a more rational decision while confronting a problem:
- Identify the problem
- Make a list of possible solutions
- Consider the real consequences, both good and bad, of each possible solution
- Weigh the good consequences. Do they outweigh the bad? Do they bring you closer to your goal?
- Make a decision and act