Thomas Edison had over a thousand inventions, some of which, like the electric light bulb, have made a huge impact on everyday life. But not all of his inventions were successful, although he would refrain from putting it this way. “I have not failed. I’ve just found 10,000 ways that won’t work,” he said once.
Because new businesses are statistically likely to fail, successful entrepreneurs, like Edison, must be willing to accept the risks of starting a new business. The acceptance of risk makes it unsurprising that entrepreneurs are extremely optimistic, when compared to the average person.
But can an entrepreneur to be too optimistic? A new report from Nesta examines the impact that optimism has on entrepreneurs during four major steps of building a company.
- Optimism is a positive quality when discovering a creative solution. Optimists are more likely to take risks when they have new ideas because they are able to distance themselves from potential negative consequences. Research has also found that optimism fosters creativity and innovation, because entrepreneurs discover new solutions when they shift their focus from negative aspects of a situation to more positive factors.
- When deciding whether or not to launch a company, optimism can be a negative characteristic. Research found that optimists tend to overestimate the viability of their product due to a “superiority illusion” and a tendency to ignore bad news. While entrepreneurs need resilience to transform an idea into a product, extreme optimism may lead an entrepreneur to stay with a product that is not viable, instead of moving on to a new idea.
- Planning the rollout of a firm requires tempered optimism. Researchers found a positive correlation between finishing a task on time and an optimistic outlook because positive thinking about challenging goals can make people more likely to complete a project. That said, overly optimistic planning was also found to cause project to fail due to underestimation of how long it would take to complete a task.
- Optimism can be both crippling and necessary when creating the innovative product. Extreme levels of optimism were correlated with entrepreneurs staying with a project when the company was no longer salvable. Optimism also led entrepreneurs to underestimate their competition. However, mediated-optimism, research found, is important for entrepreneurs because they maintain confidence in the face of numerous setbacks.
At all four steps, research found that optimism plays both a negative and positive role in the outcome of a business. Overall, the report suggests that entrepreneurs who are realistic optimists are most likely to succeed.
To read the full report, please click here.
Contributed by Emily Luepker