How Entrepreneurs Think – Are Results Only a Few Different Thoughts Away?
We are what we think.
Every thought is tallied throughout the day toward our overall personality traits and habits. Over time, our mindset is developed and set into place.
This mindset is used to make decisions and sets the stage for how we react to new stimuli like opportunities and risks.
Empirical studies have shown that, in the workplace, there is a difference between the mindset of a traditional employee and an entrepreneur.
What is a traditional employee? In today’s culture, it means someone working from 9 a.m. to 5 p.m., Monday through Friday. The employee has a boss, and likely, the boss has a boss, and so on. There is a hierarchy and the employee exists somewhere beneath the top level taking orders and doing the work assigned to them.
The employee looks for security. The job provides a steady income for a life outside work, and usually, as long as they are employed, they have a secure lifestyle. Risks and opportunities are viewed more from what is being lost than what could be potentially gained, and so they often wait for a guaranteed win.
The entrepreneur, on the other hand, takes calculated risks with a belief that they can navigate the complicated waters that inevitably arise with entrepreneurship. They focus more on what is to be gained rather than what might be lost.
Across multiple studies, self-efficacy is shown to not only separate the mindset of the employee and the entrepreneur, but also to act as a cornerstone for cultivating additional entrepreneurial traits.
It has more to do with believing in oneself, however. Other studies have shown that traits like alertness and less susceptibility to cognitive fallacies are evidence of an entrepreneurial mindset.
The studies are clear on the “what” when it comes to what an entrepreneur thinks about.
This entrepreneurial mindset might seem difficult to attain when you’re coming from the traditional employee mindset. But if you can train yourself to think in a different way, seeing the world like an entrepreneur will provide you with many more opportunities.
What Composes the Entrepreneurial Mindset?
As people are becoming more enabled with tools like the internet and the barriers to entry for entrepreneurship break down, a fiendish trend has emerged to discover the differences between an entrepreneur and an employee. Sure, the entrepreneur has their own business, the employee works for the business, but what separates the people besides their titles? Multiple studies have been done to search for the distinguishing mindsets between the entrepreneur and the employee.
A 2013 study, authored by Kristo Nikolov and Boris Urban, and reported in the SA Journal of Industrial Psychology (SAJIP), highlighted the differences in perceptions between employees and entrepreneurs.
The study asked 140 employees and managers in one organization to specifically look at “employee perceptions of risks and rewards in terms of corporate entrepreneurship participation.” The participants were given scenarios and asked to rank variables.
What Nikolov and Urban found was that across the board, the most important variable encouraging people to support a scenario was venture success probability, followed closely by financial reward. These two alone accounted for almost half of the importance when weighing each scenario.
They also found that job risk and pay risk were the most significant deterrents to participating in entrepreneurial activities, which is to be expected. With a considerable risk of losing your job and losing money by participating, who would want to pursue one of these scenarios?
The employee mindset is overly concerned with the ideas of job risk and pay risk. A steady job and good pay is tied to their security, and that plays a crucial role in making decisions. Losing the job or receiving less money goes directly against that mindset.
This is where a curious factor comes into play.
The participants with entrepreneurial experience placed less importance on job risk and had a higher positive perception of venture success probability. They believed more in the scenario’s success than in worrying about the risk of losing their job. Nikolov and Urban go on to speculate on their findings. “Perhaps employees with prior entrepreneurial experience are more confident about their ability to navigate the entrepreneurial process successfully, particularly because research shows that experience in the entrepreneurship domain includes having dealt with start-up problems.”
Confidence is the separating trait here. A higher belief in one’s own abilities is a key thought process in an entrepreneurial mindset.
Where the employees were only looking for the guaranteed win with a minimal chance of loss, the entrepreneur was looking for what they believed they could make work.
A guaranteed win is the absolute confidence on paper that the project will succeed. This need actually represents a lack of confidence for the employee. They need to be told it will work instead of believing they could make it work.
The SAJIP study is further backed up by an empirical study out of the Rensselaer Polytechnic Institute, which found that belief in one’s own abilities, or self-efficacy, was the major differentiator between the employee and entrepreneur.
Robert A. Baron and Gideon D. Markman sent surveys to 184 addresses, receiving 82 surveys back. The survey included 60 items, of which 17 assessed demographic information and 43 assessed six cognitive factors. These include alertness, planning fallacy, counterfactual fallacy, heuristics, overconfidence, and self-efficacy.
In this study as well, the major cognitive factor that separated the entrepreneurs from the non-entrepreneurs was self-efficacy.
The study also found that non-entrepreneurs tended to be more biased to the planning fallacy, underestimating the time it takes to complete a task, and heuristic thinking, resorting to old ways of thinking that have worked in the past to make judgments and decisions.
The planning fallacy might be because non-entrepreneurs lack the experience to know how long a new entrepreneurial task might take.
Thinking heuristically would also be a trap for the employee. When you are used to doing things in a certain way, and that way works, it can be easy to resort to those old modes of thinking instead of trying something new and entrepreneurial. The entrepreneur knows that new ventures require new ways of thinking and new approaches to problems, however close they may resemble problems encountered in the past.
Two more factors that signaled if a participant was an entrepreneur or non-entrepreneur were alertness and lack of overconfidence. This result was predicted in the original hypothesis. Baron and Markman said, “In accordance with the hypotheses, this exploratory procedure suggested that entrepreneurs—as compared with non-entrepreneurs—tended to be more alert but less overconfident.” An entrepreneur would understand that overconfidence is as much of a trap as heuristic thinking. Overconfidence might lead to overlooking issues that need attention. The “this can’t possibly fail, it’s too good!” mentality may get others excited about your venture, but will lend itself to hollow expectations.
This study paints an overall picture of an entrepreneur’s mindset. They are less biased to the planning fallacy, think less heuristically, are less susceptible to overconfidence, are more alert, and have a high degree of self-efficacy.
Moving from an employee mindset to an entrepreneur mindset is the goal. Now how do we get there?
It takes time — the mindset of an entrepreneur is not created overnight. And other studies have shown that slower, smaller steps work best.
Creating the Entrepreneurial Mindset
We know the traits we’re aiming for as we move from an employee mindset to an entrepreneur mindset.
You might have the urge to immediately implement each trait found in the empirical studies. You might start saying “all right, from now on I’m going to believe in myself and my project.” You might start to eliminate doubt, second-guessing, and asking too many questions in favor of blind belief in your work.
However, the cold turkey method of turning off the thoughts that didn’t work and turning on the thoughts that will make us an entrepreneur might not be the best option.
A study done by the Harvard Business Review found that “many of the progress events [their] research participants reported represented only minor steps forward.”
The study recorded the end-of-day survey entries of 238 individuals across a variety of different industries and projects, all involving some level of creativity. On days in which the participants were in a good mood were also when 76 percent of the progress was made. The explanation for this came down to “incremental progress [increased] people’s engagement in the work and their happiness during the workday.”
The minor steps toward progress for a programmer looked something like this: “I smashed that bug that’s been frustrating me for almost a calendar week. That may not be an event to you, but I live a very drab life, so I’m all hyped.”
This is a typical progress event from the over 12,000 entries submitted. Fixing a bug is a small event in the overall programming project, but it is progress. When progress is combined with increased engagement in the work, it’s easier to continue working to reach your goal.
In the same way, when we begin to shift toward an entrepreneurial mindset, we should look first toward minor changes.
The studies above showed us that self-efficacy is a primary driver in an entrepreneur’s thoughts. As with many things in life, it comes down to confidence. As the great Roman poet Virgil puts it, “They are able who think they are able.” What are you already good at? Is there a skill or talent that you developed over the years?
It doesn’t have to be that you’re the best investor out there. It could be as simple as you’re good at a sport, or public speaking, or even video games. I’d venture a guess that you weren’t good at it in the beginning. Now that you are good at it, there also exists a certain confidence about your skill. With this, you can continue to get better. What you should also realize is that you went from bad to good by investing your time consistently and that this is a repeatable process for new skills.
Those who have experience with entrepreneurial ventures were confident about their ability to succeed in new ones. They weren’t born with entrepreneurial experience; they jumped into it. They took a risk and navigated the new waters while gaining experience along the way. The more experience they had, the more confidence they had.
Since confidence is naturally gained through experience, it’s time to get your hands dirty if you’re looking to move your employee mindset to an entrepreneurial mindset.
Start small. Look for new ventures that you can participate in without having to run the whole operation. Get to know how they started. Take interest in how they overcame any problems. Learn, observe, and contribute. Throw in an idea or two that you think might help.
Most importantly, ask questions. You may think they’ll scoff, or ignore you, or not have the time, but remember these people are entrepreneurs. It’s likely they’ll love to talk about what they’re working on.
After you’ve gotten your feet wet, if you’re still not sure about making the full entrepreneur plunge, you could start with something small and simple. Think a lemonade stand but for adults. It could be a small venture just for your neighborhood, or community. Do it to learn more about running your business rather than trying to have your lemonade stand compete against Minute Maid.
The more you invest your time into the experience, the more your self-confidence will grow. It is a truth that underlies any talent or skill that exists.
Be More Alert
The studies also found that high alertness is a good indicator of an entrepreneur.
To be more alert is to be more present with the current situation. A great and straightforward way to practice being more present is with meditation.
Before you close the tab, there will not be any sitar and incense coming your way, don’t worry (unless that’s your preferred method, of course).
Meditation is as versatile as it needs to be to fit into your already busy life. Five minutes, 10 minutes, or even 20 and up may be the perfect number for you. As you become comfortable, increasing the time will further help the mind to focus on the present moment.
The mind changes when you meditate. That’s the goal here, isn’t it? To change the mindset.
The mind becomes calmer and more able to focus on what is happening right now. With meditation and consistency, your mind will begin to be more alert to your surroundings. It could be as simple as noticing when you stand up or sit down. You may start to pay attention to noises around you more often. There are also the benefits of a calmer attitude and less stress.
Using small steps to create progress toward self-efficacy and alertness, you will begin to shift toward an entrepreneurial mindset. Believing in yourself and being consistent over time is key to completing the shift.
It All Starts With Your Thoughts
Change is never easy. This change can be especially difficult if you are shifting from a traditional employee to an entrepreneur. The waters are muddied with misinformation and overconfidence. There is an enormous amount of advice about how to become an entrepreneur. An area often overlooked when trying to shift to an entrepreneur is the mind.
The mind is the most accessible tool at your disposal. There are thoughts that distinguish an employee from an entrepreneur. These include strong self-efficacy, alertness, and avoidance of pitfalls like overconfidence, heuristic thinking, and the planning fallacy.
If your goal is to run your own business, then a solid place to start is to shift your mindset first.
Explicit, overnight change toward these thoughts can seem daunting. Instead, look to the smaller, more sustainable steps. Minor changes toward the mindset can help you to become the entrepreneur you desire to be. The mindset will reflect itself in the actions you take and the lifestyle you are determined to create.
Photo credit: Sanngat
Garrett you legend. Awesome write up mate.
One method I use which never fails to keep my motivations high is to consistently look back on the progress I’ve made.
Arguably, the greatest piece of motivation you can give yourself – the realisation you’ve already made steps in the right direction.
That’s a very good way to look at it. It reminds me of an old quote “The only competitor you have is yourself”. The idea of keep measuring what you did before, with what you’ve done now, as a way to keep inspiring you to move forward and into bigger things is something that has always helped me in my journey.
Garrett: Great article, and loved the idea of self-efficacy in the development of an entrepreneurial mindset. As a current “employee” I am slowly moving toward the self-efficacy idea of confidence in my abilities while taking small steps towards my goals of becoming an entrepreneur. Thanks for sharing this well thought out article!