The case for pessimism: Cheery biz owners earn less money

There’s a business case to be made for being a pessimist. A new study finding that optimistic business owners earn about 30 percent less than those with a less rosy outlook. 

Optimistic people may be better off remaining as employees than starting their own businesses, according to a new study from the University of Bath, the London School of Economics and Political Science, and Cardiff University, published in European Economic Review.

Looking on the bright side may not pay off, at least in business ownership, the researchers found. Optimistic people may be more likely to set up a business based on unrealistic beliefs about their potential success. That may help explain why about half of all small businesses fail within five years, they added. 

“As a society we celebrate optimism and entrepreneurial thinking, but when the two combine it pays to take a reality check,” said Chris Dawson, associate professor in business economics at the University of Bath’s School of Management, in a statement. “Pessimism may not generally be seen as a desirable trait, but it does protect people from taking on poor entrepreneurial projects.”

Although the study is based on data from the British Household Panel Survey, the rate of small business failure is similar in both the U.S. and the U.K. 

Other researchers have taken a fresh look at the role of pessimism and found that a skeptical view can pay dividends because it prompts people to consider all the downsides and plan ahead. Pessimists are also less likely to be lulled into complacency, according to the MIT Sloan Management Review.

Yet there’s one place in business where optimism may win out: the employee ranks. Workers with upbeat personalities and outlooks are more likely to get promoted and find new jobs, researchers at Duke and Yale found in 2010 research. 

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