Worry warts do not naturally gravitate toward the world of business.  You may have consulted with a guidance counselor in high school or a career counselor in college about the career fields to which you were best suited.  If you are an overly cautious person, the career counselor probably did not encourage you to pursue a career as a venture capitalist or serial entrepreneur.  Faking it until you make it is the name of the game in business, and doing this without being discouraged by the financial losses you incur along the way requires a certain mindset.  An Birmingham business & corporate law attorney could be just what you need to help you make wise business decisions and to avoid getting carried away with the feeling that you can’t lose.

Do Hubris and Entrepreneurship Naturally Go Together?

An article in the newest edition of the journal of Proceedings of the National Academy of Sciences shows that investors who behave with overconfidence in their investments tend to have selective memory about the previous performance of their investments.  The authors of the study, Daniel Walters and Philip Fernbach, conducted their research on a group of stock market investors, but it is not too much of a stretch to see this behavior in other financial decisions involving risk.  In fact, the idea that one can never have too much confidence in one’s decisions is prevalent in entrepreneurship.  Think back on the self-help books you have read about business; many of them encourage you not to second-guess yourself and not to be deterred from your project even if you keep losing money before you get a return on your investment.  Even the ones that don’t go that far tend to valorize self-confidence and take the attitude that confidence gives rise to success instead of the other way around.

Get a Reality Check from Your Lawyer Before You Sign on the Dotted Line

On the surface, it might seem that Walters and Fernbach’s article is playing to your family members who think you should give up on entrepreneurship and get a safe, salaried job, but there is more to the story.  Walters and Fernbach found that, while the investors tended to remember their past returns on investments as being better than they were, they were not immune to a good old-fashioned reality check.  When the researchers instructed the investors to review their previous returns on investment before making a new investment, they behaved more cautiously.  A business law attorney can help you think clearly about the risks involved in an investment before you commit to a financial transaction, as well as helping you think through other possible outcomes related to your decision besides the return on investment.

Let Us Help You Today

Multiple perspectives are the secret ingredient in the most profitable business decisions.  A business law attorney can help you decide whether you can afford to embark on a business venture if the return on investment does not turn out to be as high as you planned.  Contact Cloud Willis & Ellis for help.