Business Optimism: A Bias, Boon or Both?
According to science, humans suffer from optimism bias. Well, at least 80% of humans.
An optimism bias is when you trend to the positive in a big way—despite evidence that may suggest other, less desirable outcomes.
As cognitive neuroscientist Tali Sharot explains in her Ted Talk:
“The optimism bias] is our tendency to overestimate our likelihood of experiencing good events in our lives and underestimate our likelihood of experiencing bad events. So we underestimate our likelihood of suffering from cancer, being in a car accident. We overestimate our longevity, our career prospects. In short, we're more optimistic than realistic, but we are oblivious to the fact.”
It’s not just a U.S. phenomenon. The optimism bias transcends borders, race, cultures, and age. It’s a way of thinking that is physically wired into our brains.
Most entrepreneurs and business owners have it—it compels them forward when people tell them they’re crazy. It pushes for opportunities while others question them. It also keeps them balanced. Optimistic business owners more often report a good work-life balance and a love for their jobs.
But optimism biases do come with a downfall. According to Sharot, “Unrealistic optimism can lead to risky behavior, to financial collapse, to faulty planning.”
Meaning, it’s good to leap, but have a parachute just in case.
The Wild Optimism of the Business World
When you look at businesses now, optimism reigns supreme. And it isn’t just because of a bias.
The Small Business Optimism Index for January 2018 from the National Federation of Independent Businesses (NFIB) found that nearly 1/3 of the business owners said that it is an ideal time to expand—the highest number since the survey started 45 years ago.
Another survey of 365 SMBs and accounting firms discovered that more than 50% felt “very confident” about the economy and that more than 70% were confident about business opportunities in 2018.
In the 2018 Business Leaders Outlook from JP Morgan Chase, 85% are optimistic about their company’s performance, and 89% are confident about the national economy.
Most importantly: This optimism is translating into action.
The Chase survey found that 64% plan to increase full-time personnel, 24% plan to add part-time personnel and 76% will increase compensation. Likewise, the NFIB survey reported that 55% of businesses are hiring or trying to hire.
So what’s spurring this optimism?
According to the NFIB:
“The new tax law, the Tax Cuts and Jobs Act, produced the most recent boost to small business optimism. And federal government related cost pressures continue to abate, offering a more supportive business climate for small firms. Consumer spending remains supportive, and business spending and housing remain strong.”
Business Areas of Focus
Each year, Inc. ranks the fastest-growing businesses in the United States. Oracle and Inc. teamed up to survey the Inc. 5000 and discover what drives their success and where they are placing their focuses to continue it.
Again, optimism rises to the top with 9 out of 10 saying they were confident about their companies’ futures. The report notes that “Entrepreneurial optimism is more than pie in the sky. It provides the motivation, fortitude, and resilience needed to achieve success.”
What did they attribute their success to?
- 53% said gaining, keeping, and growing customer relationships, including responding quickly and smartly to customer inquiries
- 37% said hiring and retaining the right talent, which results in creating a company culture that attracts the best candidates.
When asked why they made the Inc. 5000 list, they responded:
- Great sales and marketing (41%)
- Ability to scale (37%)
- The right management team in place (36%)
The Cloud and Business Growth
However, the report suggests that these companies are overlooking the competitive advantages provided by the cloud. Twenty-three percent say the cloud creates a competitive edge and many consider the cloud “almost as a commodity, not as the growth enabler it can be.”
The cloud offers a perfect companion to companies focused on growth in this optimistic business environment. It relieves organizations of the burden of handling on-site IT (servers, updates, etc.). It is cost effective and scales easily as your company expands. It enables mobility and automation—essential conveniences for today’s busy owners.
The cloud also supports virtual working. As more businesses expand this year, the fight for finding and hiring qualified talent will intensify. By offering off-site working, you can significantly extend your talent search from a geographic point of view—and offer "working from home" as an incentive for existing employees.
Finally, when you integrate your cloud systems, you get an enhanced level of business insight. For example, when you migrate your bill payment, AR, expenses, payroll and more to the cloud and integrate those solutions with your general accounting system (like QuickBooks Online, Xero, or NetSuite), you create a system with its finger on the pulse of your financial operations. It gives you the valuable financial insight to stabilize cash flow, identify opportunities, and plan the future of your company.
How Optimistic Is Your Business?
Optimism begets success. And success spurs optimism. It’s an ideal cycle and one that will undoubtedly give companies a valuable edge in this business-friendly economic environment.
Go forth and, optimistically, conquer!