The action which follows an opinion depends as much upon the amount of confidence in that opinion as it does upon the favorableness of the opinion itself – Knight (1921)

“Overconfidence is ego. In my experience, overconfidence leads to dumb mistakes that you otherwise wouldn’t make if you managed your ego. When you don’t manage your ego, you lose focus, attention to detail, and become complacent. Confidence is great, overconfidence is never good. In the industry I work in, overconfidence will get you or someone else seriously injured or killed.” – u/ChooChooBuckaroo, a Reddit Entrepreneur.

What is Overconfidence?

Overconfidence can be defined simply as “overestimating the probability of being right” (Busenitz & Barney, 1997: p. 2). Evidence suggests that entrepreneurs, compared to managers, are more likely to be overconfident (Busenitz & Barney, 1997). Not surprisingly, three factors that make entrepreneurs more likely to exhibit overconfidence are: youth, being the founder of the venture, and having less education (Forbes, 2005). Yet, these are just averages: any entrepreneur may experience times of overconfidence. As a result, it may be worth considering the possible upsides and downsides to overconfidence.

The Upsides of Overconfidence

Overconfidence can have positive aspects. Entrepreneurs oftentimes need to persuade others to join their cause, and a confident attitude could help to generate the enthusiasm necessary for that persuasion to work. For example, entrepreneurs may need to inspire co-founders, investors, and the first employees to take substantial risks on something that may very well fail. How likely would you be to join a firm if the entrepreneur was not confident in its success, despite the odds?

In addition, entrepreneurs often experiences many small, medium, and large failures on their way to success. Indeed, stories abound on Podcasts like “How to Start a Startup“, and others like it, where entrepreneurs find themselves pitching to over 100 investors before getting just 1 yes. Overconfidence may be a necessary ingredient to this continual pursuit despite the seemingly never-ending failures to get there.

The Downsides of Overconfidence

However, overconfidence can have negative ramifications. Just as overconfidence can serve to facilitate support from those around an entrepreneur, it can also be a turn-off. Indeed, if one is too overconfident and does not deliver on expected results, soon available social networks will start to realize that the entrepreneur is indeed overconfident, and likely not taking the necessary actions to support that overconfidence. If you are always very confident that you will succeed, but you spend more time thinking about how confident you are than you do actually working towards a tangible goal, then overconfidence is holding you back!

Entrepreneurs, in addition to building their ventures, need to make strategic decisions that may reap great rewards or result in failure. When making such strategic decisions, an overconfident entrepreneur may not adequately assess the external environment, causing the firm to pursue a supposed opportunity that never really had a chance. Or, perhaps worse, overconfidence may lead an entrepreneur to be blind to alternatives that would be better, if only the time was taken to look. A Similar logic applies to the pursuit of the business opportunity to begin with.
As Albus Dumbledore once said: “Entrepreneurial opportunities can be found in the darkest of times, if one only remembers to turn on the light.”

In closing, overconfidence is prevalent in entrepreneurship, and can be used for good or bad. How are you using it?

Is Entrepreneurship For Me?

In my prior post, I asked “What is Entrepreneurship?” Such a large question cannot be answered in one blog post, but I am hoping that the discussion was helpful. Now I want to explore if entrepreneurship is the right thing for your life or not. This is the exact question I posed to my class, and I am thrilled to share our discussion with you!

The combination of my students’ wonderful minds and my ugly writing!

How is Entrepreneurship Different From a Job?

First, I asked the class to write down as many differences as they could between entrepreneurship and a normal job. As you can see in the photo above, they came up with a lot of great examples. What we found interesting is that each difference brings unique advantages and disadvantages. For example, not having a boss does offer a lot of autonomy to pursue your passions more easily. Yet, nobody watches an entrepreneur to remind them to do their job! Thus, being your own boss requires self-discipline to consistently work hard without anyone reminding you to.

Another important difference is that the sources of stress, and options for coping with them, may be different. A job may have stressors related to an unfair, uncaring, and mean boss, which the employee may have little control over changing. Entrepreneurs do not have a boss, but as a result, may deal with the loneliness of having nobody to talk to that will understand their challenges. Thankfully, entrepreneurs have more flexibility in coping: a lonely entrepreneur can dedicate some of their “work” time to building a network of entrepreneurs who can they vent to and seek advice from (see my earlier post for advice on building that network). In short, entrepreneurship is different from a job: these differences are not necessarily good or bad but do need to be understood!

Who is the Ideal Entrepreneur?

Given that entrepreneurship is different from a job, what kind of person does it take to succeed as an entrepreneur? In other words, who is the ideal entrepreneur? Patience, optimism, confidence, the list goes on and on. But, can these be developed? In short, yes. For a longer answer, I would encourage you to watch this very cool entrepreneurial story, but don’t forget to come back here afterwards!

We agreed as a class that the takeaway of this discussion was even if you don’t view yourself as an entrepreneur now (as in, you do not believe you have entrepreneurial characteristics) that does not mean you cannot become an entrepreneur. If you decide to be an entrepreneur, then: (1) many of these characteristics can be developed over time and (2) you have the autonomy to design your environment to emphasize your strengths. In other words, you can become more patient, more optimistic, and more confident, and you can structure your work in a way that facilitates that!

Thus, in closing, no matter who you are and what your background is, you can be an entrepreneur! Please leave a comment below to let me know what you think about this post. If you have a friend who is interested in entrepreneurship, please share this blog on your social media!