FROM LINKEDIN TODAY: Why are Serial Entrepreneurs Optimistic? They Forget Faster Charles Duhigg Reporter at the New York Times and Author at Random House For years, social scientists have been interested in optimism. One of the capacities that make humans special is our willingness (and occasional ability) to predict the future. “Inferences about what will occur in the future are critical to decision making, enabling us to prepare our actions so as to avoid harm and gain reward,” wrote one researcher in 2011. And given how important forethought is to making good decisions, one might expect the brain to possess accurate, unbiased foresight. Humans, however, exhibit a pervasive and surprising bias: when it comes to predicting what will happen to us tomorrow, next week, or fifty years from now, we overestimate the likelihood of positive events, and underestimate the likelihood of negative events. For example, we underrate our chances of getting divorced, being in a car accident, or suffering from cancer. We also expect to live longer than objective measures would warrant, overestimate our success in the job market, and believe that our children will be especially talented. This phenomenon is known as the optimism bias, and it is one of the most consistent, prevalent, and robust biases documented in psychology and behavioral economics.” What’s particularly interesting is how the optimism bias changes over time – particularly among entrepreneurs. All of us start bright-eyed and bushy-tailed, but as the years pass, some get slapped around by life. Marriages fail, what seemed like a great idea goes bust, fortunes disappear. Missteps and bad luck are part of life, even among those who succeed over time. For most people, the optimism bias tends to diminish as our personal ‘data-set’ of experience grows. And, in general, that’s a good thing: as we learn more, our unbridled enthusiasm is tempered and, as a result, we make better decisions. One study, for instance, found a negative “relationship between entrepreneurs’ optimism and the performance (revenue and employment growth) of their new ventures” early in life. But over time, as life teaches business people lessons, that negative relationship diminishes. Entrepreneurs reach a balancing point – optimistic enough to believe in their dreams, but not so glib that blind spots hide problems ahead. There is one group, however, that might be exempt from this phenomena: serial entrepreneurs. As one study found: “Using data from a representative survey of 576 entrepreneurs in Great Britain, we find that experience with business failure was associated with entrepreneurs who are less likely to report comparative optimism. Portfolio entrepreneurs are less likely to report comparative optimism following failure; however, sequential (also known as serial) entrepreneurs who have experienced failure do not appear to adjust their comparative optimism.” In other words, most entrepreneurs tend to learn from their mistakes. But serial entrepreneurs – who are rightly celebrated as engines of creation, the folks more-likely-than-average to eventually hit the ball out of the park – seem to remain as optimistic as ever. And, studies suggest, they are potentially less likely to learn valuable lessons. Why? Evidence has begun to suggest that the chronically optimistic actually think differently than everyone else. For one thing, they seem to forget disappointment much faster. Brain scans of ‘high optimists’ suggest that their pre-frontal cortexes are worse at detecting ‘estimation errors.’ Put another way, when they make a mistake, high optimists tend to forget they over-estimated their abilities in the first place. Does that mean they learn less? Or that they are willfully blind to their past weaknesses, which - potentially - is a strength over time? For that matter, how optimistic should we all be? And how should we temper that optimism with experience?
Posted on: Fri, 09 Aug 2013 21:23:10 +0000
Trending Topics
Recently Viewed Topics
© 2015