Americans are big on dreaming when it comes to business, even though business is driven by the brutal realities of the market. Without the optimism that you're going to make it, starting your own company — really doing it and putting in the work — gets a lot harder. New research, however, suggests that staying bright-eyed might cost you more than think.
Economists at the University of Bath have just released a study tracking a number of business during an 18-year period in Great Britain. Specifically, the researchers were looking for insight into why about half of U.K. businesses fail within the first five years. Optimism, it turns out, plays a nontrivial role in that failure: Significant numbers of entrepreneurs fail or refuse to take into account the economic realities they're up against. Whether that means a mismatch in skill sets or whether the market will even support a business plan, it does seem that more self-starters could use a healthy dose of pessimism.
The majority of us might have to learn to get gloomy. At heart, about 8 in 10 people are natural optimists. Yet this new research shows above-average optimists running their own businesses earned about 30 percent less than above-average pessimists.
"The personal and societal fallout of failed businesses shouldn't be underestimated, which is exactly what optimists do," said co-author David de Meza in a press release. That doesn't mean you should get bitter and stop trying. It does, however, mean you should ask yourself a lot of hard questions before you jump into a new venture — and answer them as honestly as you can.