An Entrepreneur’s Psychology: What Truly Drives Success?

Psychology is the study of mental processes, emotions and behavior. Its utility is everywhere. This also relates to business, where you are providing products and services to people. As such, an entrepreneur cannot run a business without knowing how to manage his/her own emotions or the needs of the employees.

In fact, their venture will most probably fail if they do not take into account psychological factors of their market! Every strategy has to cater to the consumer’s psychology.

Moreover, when managing a number of people in startups, it is important to maintain group cohesion without allowing ‘group think’.

So, for an entrepreneur, understanding and using psychology is crucial.

But what exactly is the psychology behind successful entrepreneurship?

I will draw from actual research, particularly that of Kaushal Mukherjee (2016) and Frese & Gielnik (2014), to demonstrate my points. This article will explore the core psychological characteristics and processes that define a successful entrepreneur.

So, let’s dive right in!

1. The Entrepreneurial Mindset: Not Born, But Built

Are entrepreneurs ‘greater’ humans? Well, they live and breathe much like the rest of us do. They need to eat food, drink water and sleep.

Mukherjee does away with the myth that entrepreneurs are “born to lead.”

I do admit that some traits can very well be innate to a person who sells innovation for a living. For example, trait conscientiousness of the Five Factor Model does relate to success in startups.

But are business icons somehow gifted by God or biology to rule by birth?

The simple answer is no.

The vast majority of innovators are shaped by experience. In fact, young entrepreneurs often lack the managerial or marketing know-how when they start out. This is why they are likely to fail in the beginning. However, they can gain confidence and competence as they make these mistakes and persist.

Steve Jobs: A Peak into an Entrepreneur’s Mindset

Steve Jobs use to have walking meetings. He thought that walking while discussing important matters can help align perspectives. This is an indication of someone who had a proactive approach to work.

Another interesting point was that he used to dress the same way almost every day.

Why?

Because this freed him of wasting too much time on deciding what to wear!

Parts of the Entrepreneurial Mindset

Their ability to persist, however, is a part of a mindset.

Motivation, a part of this mindset – particularly intrinsic motivation – plays a major. We’ll discuss what that means later on.

There are other parts of this mindset as well.

Frese & Gielnik note that the entrepreneur’s mindset has personal qualities such as self-efficacy, achievement motivation, and proactive personality​.

And for someone who has to take up as much responsibility as an entrepreneur does, they have to have – or build – certain qualities.

In a nutshell, a person’s mindset effects their chances of success. The more their activities and lifestyle choices align with their work, the better their focus can be.

2. Risk-Taking—but Calculated

Entrepreneurs are risk-takers.

However, studies make a crucial distinction: to be successful, one has to take calculated risks.

Mark Zuckerberg: A Calculated Risk for Virtual Reality

Mark Zuckerberg believes that online content will become more interactive. This explains why video content in news feeds has boomed over time. It also shows why his Edgerank algorithm prefers video.

And so, he believes the next big thing will be virtual reality.

It is a risk, and back then, VR wasn’t nearly as developed as it is now. So, he had two options. He could either purchase a virtual reality company early and pay less, or he could wait until the technology was better and pay a higher price.

He chose to act early.

As a result, his Metaverse has pushed the tech industry further than the horizons that seemed possible before. He did invest $2 billion in it. But eventually, it turned out for the better.

Mukherjee explains that successful entrepreneurs balance stability and innovation in business. Thus, they foresee consequences and assess alternatives. They also tend to share or shift risks through joint ventures or equity.

3. Motivation: The Driving Force

Earlier on, I mentioned intrinsic motivation as important for entrepreneurs. Well, Mukherjee outlines that both external and internal motivation play a major role in the process. Obviously, they want to improve their economic condition.

However, personal goals and psychological rewards like status or creative expression are sometimes more important.

Jeff Bezos and His Six Core Values

Jeff Bezos continually highlighted “Six Core Values” which motivated him in business.

• Customer focus,
• ownership,
• action bias,
• frugal living,
• a high recruiting threshold,
• innovation.

Bezos wanted Amazon to become entirely customer-focused company. He wanted Amazon to become the location where individuals go to look for and learn about whatever they wish to buy online.

And surely, Amazon expanded into toys, gadgets, music CDs, films, and more. The mega company restructured after the Internet stock market bubble burst. It was making money when other dot.com start-ups vanished.

Bezos’s experience with Amazon highlights just how important ambition and personal initiative can be for an entrepreneur to succeed.

Frese & Gielnik actually list down some motivators that students of psychology can be particularly interested in.

These motivators are

• Goal-setting,
• Personal initiative, and
• Visionary thinking.

Entrepreneurs are guided by a vision of the future. This pushes them to persist even against uncertainty​. They are visionaries with a point to prove!

4. Innovation and Flexibility

Innovation is important in start-ups entering saturated markets.

They might launch new products. Or they could adapt new production techniques. Or they could simply move past outdated models. Openness to Experience is one of the five personality traits in the five-factor model. And this kind of openness to ideas can shape entire industries!

Henry Ford Pioneers Mass Production of Vehicles

Initially, Henry Ford wanted to ease farmers’ labor. His trucks were to assist them in transporting commodities to markets. However, things took a turn when the Ford Motor Company debuted the Model T, an automobile, in 1908.

Ford basically pioneered mass production. His company fused components created by different producers into a new manufacturing method.

Why?

Because he wanted to produce his utility car at a low cost. He broke down the skilled crafts prevalent in the early automobile production process into simpler tasks. This made it possible for unskilled labor to use specialized machines to do them.

By this, he not only made the car cheaper, but he also brought technological innovation into the market

Ford’s Model T also had a less flagrant appearance. For the majority of Americans with limited incomes, however, this was not an issue. Their primary concern was finding an affordable, and dependable means of transportation.

And so, the Model T sold very quickly. By 1923, half of all cars worldwide were Model Ts, and mass-production efficiency had reduced the price to less than $300.

Thus, Ford controlled the car industry.

Ford’s story shows how entrepreneurs have to be psychologically flexible. They have to keep an open mind. And they have to be ready to adjust plans on real-time feedback.

Entrepreneurial alertness

According to Frese & Gielnik, this is the ability to spot opportunities without actively searching for them. So, entrepreneurs have to be cognitively sharp and adaptive. This is instrumental in helping them overcome new problems innovatively.

5. Planning vs. Improvising: A Psychological Balancing Act

Successful entrepreneurs plan psychologically. They engage in mental simulations and “if-then” action strategies. Psychological planning enhances their execution, goal achievement, and resilience.

A Study on Entrepreneurial Action

A study conducted on adaptive actions among Entrepreneurs yielded interesting results. The researchers interviewed more than 40 entrepreneurs and found four major action-oriented themes

• Urgency, which refers to acting, moving, and operating quickly;
• Unorthodoxy, which involves taking action that is novel, non-obvious, interesting, and different from what might be expected;
• Intended usefulness, which involves taking action that is meant to serve a specific purpose; and
• Addressing immediate challenges or opportunities, which refers to acting in response to a specific crisis.

This model is better than rigid, overly detailed plans which can decrease adaptability. Instead, research shows that entrepreneurs who improvise in structure tend to outperform others​.

6. Grit: Passion, Stress Tolerance & Vision

We are emotional beings.

But passion is essential to keep a new venture going. Especially when the investment is low. Moreover, a high stress tolerance can help through uncertainty and setbacks. Because business innovators become so used to stress, they also end up making very rapid decisions. Entrepreneurs thus are psychologically strong and emotional intelligent enough to go through various challenges.

In short, they have a high level of grit.

Walt Disney, Failure and Success

A newspaper cartoonist in the early 1920s had a fantasy of starting a business making animated cartoons. He would have to leave his current job for it. But the risk seemed worth it.

The entrepreneur’s old supervisor at the Kansas City Star, where he was employed, said that this cartoonist “lacked imagination and had no good ideas.” Nevertheless, the cartoonist left his job. He ventured into two unsuccessful businesses in the following time period. And he had no profitable cartoon films published.

However, he hired more people and took important lessons from his past blunders. The entrepreneur tried for a third time. He also founded the animation company that now goes by his name, Disney, in 1923.

Entrepreneurs are not robots. Rather, as Frese & Gielnik note, positive and negative emotions significantly influence entrepreneurial action.

There is a caveat here though.

While positive emotions like optimism can drive vision, overly positive emotions are not that great. For example, overconfidence may lead to faulty judgment. One thing that entrepreneurs can greatly benefit from is emotional regulation and learning from feedback​.

So, if you are thinking about starting a new venture, overcoming painful emotions is quite necessary. Moreover, conducting psychological tests of employees can also help you choose the person high enough stress tolerance or grit, as is required by the company.

Final Thoughts

The psychology of entrepreneurship is the engine behind an entrepreneur’s action, innovation, and eventual success.

People can have some great ideas. However, they can only succeed in the long-term if they think, feel, and behave adaptively in uncertainty. Their motivations have to align with growth, and opportunity.

Understanding this psychological foundation is vital. It can not only help aspiring entrepreneurs thrive but also guide mentors in making their ventures more effective and long-term. This is another example of how crucial studying psychology can be for a professional