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February 21, 2009

How To Use Pessimism To Your Advantage

Yesterday I wrote an article about how to use optimism to not only one's advantage, but in order to encourage those around them.  While Optimism is great, it is also best to balance optimism with pessimism (or paranoia depending on how you look at it).  

As Cameron had pointed out in a comment yesterday, a realist is neither optimistic nor pessimistic, and a realist will always look at the world through this neutral lens.  The problem with a realist is that if they were to look at the probability of starting a company and turning it into a billion-dollar corporation, they would laugh and go buy a McDonald's franchise, a near guaranteed way to become a low-single-digits millionaire.   The realist will never try to surmount mountains that have never been surmounted before, because the odds are stacked against them.

An optimist, on the other hand, not only takes the chance at striking it big, but also encourages others to do so as well, although unfettered optimism is pure gambling - think the people use see waste their money at slots at casino's or join all the other 49ers in the same river while gold-digging - and wastes your time and money.

The perfect balance to optimism is pessimism, but not "I can't do it" or "It will never happen" pessimism, but rather pessimism that you focus for risk management.  Pessimism is great for asking "What if...?" and seeing how negative events can hurt you.  When used properly, this process allows you to identify holes in your plan, so that you can pre-emptively plan for them to ensure yourself greater success at a lower risk, while also setting yourself up to recover a decent return on your investment (whether it be time, money, or a combination).  By combining optimism and pessimism, you will take better calculated, bold risks, instead of never taking bold risks or gambling your life away.

Personally, I would rather take calculated, bold risks and live a fulfilling life due to them than ask for the rest of my life what would have happened had I actually stepped outside and smelled the roses.

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