Graeme Newell

Optimism bias

Are you being an optimist or are you obstinately refusing to acknowledge reality? Brain science reveals that most of us are crazy bad at predicting how we will feel and act in the future.

Studies show that we are quite uncomfortable with the notion that randomness plays a huge part in determining our fate. So we slyly convince ourselves that if we stay positive and don’t dwell on bad things, they probably won’t happen. Just like Scarlet O’Hara in “Gone with the Wind,” we will, “Think about that tomorrow. Tomorrow is another day.”

But being optimistic is good, right? I mean, who wants to hang around some Debbie downer who talks about how crappy the future will be? Predicting rosy outcomes does little harm most of the time…except in the world of money. 65% of us are predicted to hit retirement age with under $10,000 in savings. 

Most of us simply ignore financial planning, believing that money will magically appear to cover those future big-ticket items like babies, down payments, college tuition, and retirement.

So optimism bias helps us feel like we’re in control. Negative events like illness, divorce or financial loss just seem less likely if we just don’t think about them.

So how can we avoid optimism bias?

#1 – Build backwards from failure

Imagine it is a year in the future, and your project has been a miserable failure. Next, build a detailed list of the things that most likely went wrong. These are the obstacles you’ll want to think long and hard about – now.

#2 – Look for outside case studies

Have others tried the same thing? What was their success rate? What big problems popped up along the way? We’re much more likely to rationally consider obstacles when they have happened to other people.

#3 – Seek out doomsayer feedback

Are you lucky enough to have a friend who will give you brutally honest feedback? Before you launch any new project, ask your buddy to do her pessimistic best to convince you to abandon the project. If you still want to do that project after your friend’s diatribe of disaster, then you’re probably on to something good.