In philosophical terms, several different forms of idealism and realism exist.
The core difference between these two concepts is whether material objects exist in our minds or in the external world. According to Plato's definition of idealism in particular, physical objects exist in perfect state in the human mind, whereas realism states that physical objects exist independently of the human mind.
In other words, philosophical idealism posits the possibility that people live inside their own world within their mind, whereas the realists say the world exists in a concrete form whether human beings are around to perceive it or not.
The layperson's definition of idealism and realism distills these philosophical debates into more practical terms.
An idealist may be considered an optimist who "lives inside his head" because he constantly imagines what the world could be like. Someone who tends toward an idealistic way of thinking sees the potential in everything and has no trouble dreaming up creative scenarios.
In contrast, someone who sees the world with a realistic perspective tends to focus on what everything is like in the present moment in very literal terms.
Realists are pragmatists who remind their counterparts of the obstacles that exist —whether the idealist likes to think about them or not — on the path toward perfection. Likewise, idealists inject a forward-thinking attitude into realists' perspective by reminding them that things don't have to remain the way they are at this precise moment.
When realism and idealism are in balance, there's enough imagination and practicality to design solutions and then enact them.
How Does This Apply to Business?
What in the world do the theories of Plato, Kant, Hegel and Descartes have to do with your small business? Studying the history of philosophy and metaphysical idealism can actually teach you a lot about how to plan for your business's future. If you're too realistic, you'll never envision what could be, and you won't have that entrepreneurial desire to innovate. However, if you're too idealistic, you might have trouble identifying your current strengths or resources and have trouble getting the project started.
In the best-case scenario, you can balance your own idealism with realistic thoughts and be both a creative spirit and a practical go-getter. Most people, however, default to being overly realistic or idealistic. This natural tendency puts you at a disadvantage as you start mapping out your goals for your business. Regardless of whether you dream too big or too small, you need someone on your team who complements your tendencies and balances your perspective.
You can learn how to be more realistic or idealistic by studying the works of popular philosophers, including F.H. Bradley, G.E. Moore, G.W. Leibniz and I.H. Fichte. Whenever you begin to recognize a thought pattern that's leaning toward one extreme or the other, stop and play the devil's advocate. What would someone with the opposite philosophical perspective have to say about the scenario?
When Idealism or Realism Is Warranted
Although balancing perspectives is important, there are some instances in which you should certainly allow yourself to be as idealistic or realistic as possible. For example, idealism should shine whenever you craft your vision statement. However, realism needs to take center stage whenever you're planning for short-term gains or estimating a budget. Long-term planning and fundraising require a mix of both ideologies for best results.
Writing Your Vision Statement: Idealism
When you initially sit down to write a business plan, one of the first segments you'll tackle is your vision statement. This one- to two-sentence description summarizes all of your hopes and dreams regarding your business, and it's definitely a time to lean heavily toward idealism. After all, you can't set any goals without having a clear vision of what your ultimate achievement looks like. Even though you'll end up shortening your ultimate goals into a brief statement for anyone who reads your business plan, it's helpful to spend time thinking about your vision in detail for internal purposes.
Forget for a moment about real-world restrictions, turn off that little voice of doubt in your head and let yourself imagine the best-case scenario for your business. Pretend you've already achieved your goals and you're taking someone on a tour of your business or describing your accomplishments for a documentary crew. Write a mock-up of what your company's website or Wikipedia page would look like once your vision has been achieved. Really zero in on your intentions and assume that anything is possible.
Dreaming like this can also keep your enthusiasm levels high so that you don't lose sight of your purpose. You can even create actionable goals by working backward. Think about what needs to happen right before that final goal is achieved and keep asking that question for each new step until you have a rough outline that takes you to the present moment.
Creating a Three-Year Business Plan: Realism
Once you've gone into full-blown idealist mode and outlined the rough steps that will take you from A to Z in a perfect world, it's time to inject a dose of realism. What can you realistically accomplish in the next three years? Take into account your current assets and resources.
For example, if you currently have no funds, no prototypes and no clients, it's unrealistic to expect to rake in millions of dollars in revenue within three years. It's far more practical to set a goal of completing market research and having a working prototype in order to begin courting investors for funds.
If this is your first entrepreneurial endeavor, it can be tough to know how quick or slow certain processes unfold. Does it really take three years to reach a particular goal, or can you do it in one year? Err on the side of assuming that it will take longer than you hope it will. That way, you can simply create a new three-year plan ahead of schedule rather than feeling disappointed that you're behind schedule due to setting an unrealistic timeline in the first place.
Revising Your Budget: Realism
It's so easy to underestimate how much money a business requires, especially in the beginning when the figures are simply estimates. Creating a budget warrants complete realism. If you get overly idealistic when planning a budget, you may inflate key figures like production capacity or total sales. With an inflated projected revenue, you're at risk of taking on monthly expenses for which you cannot pay.
Fundraising: Both Strategies
You know that you need to be realistic when creating a budget, and that's true whether you're establishing a profit and loss budget or deciding how much funding you need to raise to carry out important research and development. However, the total dollar amount with which you come up should be seen as a minimum requirement, not as the ultimate goal. Once you've used realism to discover the minimum, it's time to start using idealism to collect the funds.
Long-Term Planning: Both Strategies
When you create a long-term plan, it's important to move back and forth between idealism and realism. Idealism will allow you to feel excited about the possibilities, but realism will help you stay grounded in what's possible in the present moment. In other words, use idealism to set your major milestones. Then, switch to a more realistic viewpoint to fill in the gaps with actionable steps.