Overoptimism Tendency
The tendency to be excessively optimistic, even in the absence of pain or threat, leading to foolish beliefs and decisions; it can be countered by probabilistic thinking.
THE IDEA
OVEROPTIMISM TENDENCY
Overoptimism is more dangerous than overpessimism.
—Miles Anthony Smith
About three centuries before the birth of Christ, Demosthenes, the most famous Greek orator, said, “What a man wishes, that also will he believe.”
Demosthenes, parsed out, was thus saying that man displays not only Simple, Pain-Avoiding Psychological Denial but also an excess of optimism even when he is already doing well.
The Greek orator was clearly right about an excess of optimism being the normal human condition, even when pain or the threat of pain is absent. Witness happy people buying lottery tickets or believing that credit-furnishing, delivery-making grocery stores were going to displace a great many superefficient cash-and-carry supermarkets.
One standard antidote to foolish optimism is trained, habitual use of the simple probability math of Fermat and Pascal, taught in my youth to high school sophomores. The mental rules of thumb that evolution gives you to deal with risk are not adequate. They resemble the dysfunctional golf grip you would have if you relied on a grip driven by evolution instead of golf lessons.
When to use it
Evaluating the likelihood of success for a new business venture.
Assessing personal financial investments and their potential returns.
Planning project timelines where overly optimistic estimates are common.
Risk management in safety-critical industries where overoptimism could lead to underestimating failure probabilities.
FROM THEORY TO EVERYDAY LIFE
In practice
Lottery Ticket Purchases
A lottery buyer overestimates the chance of winning despite the minuscule odds. Buying a ticket alone does not establish this bias; the example concerns an inflated probability estimate.
Grocery Store Business Model
The source uses the prediction that credit-delivery grocery stores would displace cash-and-carry supermarkets as an example of optimism about a business model.
A MOMENT TO REFLECT
Put it to work.
Can you think of a time when excessive optimism led you to underestimate risks?
How might you apply probability thinking to counteract overoptimism in a current decision?
In what areas of your life do you see others (or yourself) demonstrating the overoptimism tendency?
CONTINUE THE CONVERSATION
Source texts
- Wisdom Theory 100 Mental Models (2020) (Wisdom Theory)