Optimists, Pessimists and Pragmatists

Have you ever been accused of being “Cup Half Empty” versus “Cup Half Full”? Winston Churchill once said “The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.”

I love being around entrepreneurs because as a group, they are “Cup Half Full” people. They are the first to see the opportunity and the possibility. Their optimism drives their enthusiasm and their energy.  Faced with seemingly insurmountable obstacles, they seem to persevere and be successful. Does that mean “Cup Half Full” people are good and “Cup Half Empty” people are bad?

I think that there is a danger in any organization, especially start-ups, of having too much of a “Cup Half Full” culture. Generally we equate “Cup Half Full” with Optimists and “Cup Half Empty” with Pessimists. We all have a natural predisposition to the way we look at life and opportunity.  Many people are optimists, believing that everything has a way of working out.  Others are pessimists and believe that things generally don’t work out.  The argument then becomes polarized… black versus white, up versus down, right versus left…

There is a third category, the pragmatist. These disciples of Murphy’s Law aren’t pessimists but are often mistaken for one. The pragmatist is different from the pessimist in that they won’t drag you down, rather they will bail you out. According to Howard Gwin, Pragmatists believe things have a way of working out if you impact the process and own it. 

Here is an example. A client of mine was raising their next round of financing. They were doing the tour of investors doing their pitch. They had a bad experience with one investor that screwed them around and they passed on the term sheet because it was inadequate. Shortly thereafter they had a great meeting with another investor who was very excited, scheduled a follow-up meeting and committed to take their pitch deck to their investment committee at the valuation that my client was looking for. What the client was doing was exactly in the investors sweet spot for investment. The CEO was on cloud nine and ready to single thread this to conclusion. They had a third potential investor group that they had been trying to coax to the table but the CEO was ready to park them because it looked like they would get the deal they wanted.

Here is where the pragmatist in me came out. My conversation with the CEO went like this.

Me: Great news but you need to call the third potential investor and get them to the table
CEO: But we had a great meeting and I feel really confident that we will get the current deal done
Me: Ok, but what if it doesn’t? What if two weeks from now you get word that the investment committee turned it down? What would you then do?
CEO: Then I would re-start trying to coax the third investor group to the table
Me:  Can you afford to lose two weeks?
CEO: No, so I guess I better keep after the third investor group.

Was I being a pessimist or pragmatist?

Yesterday, I was reviewing the cash flow projects of a small tech company. The CEO and his team had done a good job of building a comprehensive model. Like any model, it is based on a number of key assumptions, which in this case, largely revolve around the cost of building the sales team and the resulting revenue ramp. Again, the analysis was single thread. One set of assumptions, one set of projections.

I have learned a long time ago that I am not the smartest of the bunch. In fact, maybe not even in the top half. I have just been around a long time and look at things through the eyes of experience. I spent three hours understanding the assumptions, not the projections. Then we started changing the assumptions, not because I have clearer insight into what they should be, but rather because I know that those assumptions will operate within a range. By playing with the range on all assumptions in various combinations, new insights were discovered, not by me, but by the CEO. By the end of our session, he had new insight into key levers that could dramatically alter the trajectory of his company. Later in the afternoon, while talking to a board member and active advisor of the company, I was able to give him new insight that plays directly into the funding and capital raising process they are doing. 

I wasn’t being the optimist, cheerleading the possibilities, nor the pessimist, challenging everything that could go wrong.  As the pragmatist, I was accepting the truism that no matter how well we think we understand the problem, our ability to predict is imperfect so we have to prepare for as many of the what-ifs as we can.

Like the picture shows, I’m not the optimist, not the pessimist, just the realist.