Optimists win

Will it surprise you to know wealthy people are generally happy optimists? Probably not. In fact, most of us probably believe affluent people are happier because they are wealthy. But most of us will be wrong. Those who have achieved a measure of success in their lives have generally been optimistic and happy over their entire lives. This is also true for achievers in the fields of business, investing and sport. Those of us who live at the tip of Africa in a turbulent country can learn from these achievers.

Happy people make more money

Happy peopleA recent blog post on The Wall Street Journal site (It pays to be happy, 4 January 2013) quotes new research that finds people who are consistently happy with their lives typically earn more than unhappy people. Happy people earn an average of R32 000 per year more than the average. More worryingly, those who are “profoundly unhappy” earn 30% less than the average. It proves the point that there is a link between wealth and happiness. But it seems the path to wealth starts by being happy. Unhappy people are less likely to prosper in their careers and therefore are also less likely to be wealthy. It’s interesting that people who are generally happy from the age of 18 to 22 tend to be more successful later in life.

Optimists

After years of advising wealthy individuals, I have always been surprised by how much more positive my wealthier clients are than those who are of average or below-average wealth. I used to attribute their positive outlook to the fact that they had money to solve any potential problems. But as I found out more about these clients, I realised I was wrong. When I started to ask my clients about their early lives and in particular how they responded to setbacks, I was always surprised by how positive they were – even from an early age. They tend to have a natural belief in their ability and feel if they apply themselves positive results will follow. This is particularly true for entrepreneurs who started their own businesses.

When you ask these entrepreneurs what made them successful, many of them attribute their success to their perseverance. It’s highly unlikely a natural pessimist would persevere in a tough business, when things are going badly, whereas optimists would. It’s no coincidence most CEOs of large listed companies are optimistic by nature. Many of them are accused of being cheerleaders who always focus on the positive, without much regard for the problems facing their companies. To some extent this is a valid criticism, but one needs to understand these CEOs do not view problems in the same light as pessimists.

Investing: Try being an optimistic realist

In my experience successful investors (meaning people who have done well over decades), are almost universally optimists at heart. However, they are not unrealistic or irrational in their expectations. When I meet new people and we discuss investments, I try to get an understanding of the person’s outlook on life.

Natural pessimists are often calm in the midst of an economic meltdown because they were expecting it. However, when the market is doing well, they are usually concerned about the next crash. This might seem like a sensible attitude to money (it is), but pessimists usually have limited wealth in their later years.

The cause is simple. As they have always been “sure” the markets will crash they have tended to under-invest over their lifetimes. This decision has inevitably cost them many opportunities.

Personally it’s my 2013 goal to approach investing and business with a realistic, but optimistic view.

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