By Mark DeSantis, CEO of RoadBotics
Let’s face it, calling an entrepreneur an optimist is a nice way of saying they’re misguided and probably hopelessly so. Likewise, labeling investors as skeptics sounds like a person no one would want to be around, let alone ask for money. In either case, these judgments are not just unfair, but reveal a deeper confusion about the basic character of a determined “optimistic” entrepreneur and the courageous “skeptical” investors who fund them. This lack of awareness of how entrepreneurs and investors really think and really make decisions too often creates needless friction between these parties and can even drive them apart.
Entrepreneurs have no choice but to believe in the future. Not a blind faith, but a profound confidence that their everyday choices and actions will yield meaningful (positive and negative) results. And that those results will, in turn, serve as a foundational layer for subsequent choices and actions and on and on in a successful, never-ending cycle of actions and results. In fact, entrepreneurial optimism is confidence in the future. Each of us is not a helpless rowboat without oars bobbing about a vast ocean hoping to catch a favorable tide, but an intentional agent making a difference in a dynamic world.
Investors have no choice but to accept that what appears true is often not. It’s not a dark view of humanity, but a belief that even the most disciplined and educated among us is easily fooled by our rationales. Yet skeptical investors must also have confidence in the future. Otherwise, what is the point in investing? Proper investor skepticism says that with enough thoughtful engagement, questioning and introspection, one can discern what is humanly knowable and, most important, unknowable and, as a consequence and at the moment, make sound go/no go investment decision.
If confidence in the future drives good choices and right actions by entrepreneurs and investors alike, then why do both too often hold misguided assumptions about the other. Could it be that optimism and skepticism have mutated into their evil twins, cynicism and pessimism, respectively?
“Economists and some savvy entrepreneurs have long known the devilish impact the ‘sunk cost fallacy’ can have on our decision making.”
Raising money can be a grueling process for even the most hardened, experienced entrepreneur and nothing short of miserable for first-timers. It is not unusual to have a hundred or more meetings before a single check is written. Hearing the same questions asked again and again only to see the same dubious reactions from prospective investors leaves the most ardent believers in the future ending up cynically telling that investor what they want to hear (versus what they need to hear). Listening to pitch after pitch from entrepreneurs eager to get the reaction they want to hear can also turn the most thoughtful skeptic into a pessimist.
So how do healthy optimists and skeptics avoid falling into the abyss? How do they retain a confidence in the future?
It starts with a self-recognition that there is a very thin line between optimism and cynicism and skepticism and pessimism. It is one reason why experienced investors and entrepreneurs have one or two disinterested go-to advisers with whom they can check their own reactions. It ends with an awareness of where confidence in the future by entrepreneurs and investors originate? The scorecard for success and failure with entrepreneurs and investors is money. Yet, money just does not motivate either party. It is more an outcome of thoughtful decisions, along with good timing and luck. The motivation for both parties is the desire to have an impact, one through building a business and the other for funding that business.
Cynicism and pessimism creeps in when their original motivation for what they do is lost. It is often recovered when the entrepreneur and investor know that at any time it is better to be prepared to walk away when a belief in the future is replaced by an impatience with the future.
“Pessimism … is, in brief, playing the sure game … It is the only view of life in which you can never be disappointed.”