Posts Tagged ‘optimism’

Three reasons why a little extra optimism is a good thing

February 12, 2010

Cade Massey in Qn:

There is a fairly widely held belief among some researchers that some optimism is good. It’s a little bit like red wine: In moderate amounts, it’s good for you.

There are a number of reasons why it might be good to be optimistically biased. For example, if people are by nature a little too risk-averse, a little optimism helps counterbalance that, gets them to take a few risks they might not otherwise.

Another reason is that there is, in economic-speak, positive utility from having positive expectations, in and of itself. Setting aside any decision making that you do based on the expectations, just consider how it feels to walk through life believing that your favorite football team is going to win this weekend, that your relationship is going to work out, that your financial investments are going to pay off. If you’re thinking things are generally good, you’re going to be happier; if you’re thinking things are bad, you’re going to be unhappy.

Now, that has to be offset against what happens once these things are realized: after the game is over or the investment is complete or the relationship is over. If you have been positively biased all along, then you’re going to be more disappointed in the end than you would have been if you hadn’t been positively biased.

Now, are those two things equal? If those two things are equal, then there’s no net positive to optimism. But here’s something we know to be true: people adapt to bad news much more readily than they expect they will. So it could well be the case that those things are asymmetric. That there’s more utility to be gained or lost ahead of an event than after an event. The disappointment isn’t as big a deal as we think it is. And if that’s the case, it’s nice to have a little optimism because it feels better.

A third reason is that there can be a self-fulfilling nature to positive expectations. If you have positive expectations for somebody, they actually perform better. And if that’s the way the world works, a little positive bias is a good thing.

Optimism in moderation

June 3, 2008

The Boston Globe writes about optimism research, and includes the following cautionary nugget about the virtues of moderate optimism.

Economists at Duke found that compared to pessimists, optimists work more hours per week, save more money, are more likely to own stock, and are more likely to say that they’re never going to retire…”The moderate optimists are prudent people,” said David Robinson, who conducted the Duke study. “They pay their credit cards on time. They tell you that they save because saving is a good thing to do. . . . Extreme optimists are just the opposite. They have short planning horizons, they don’t pay their credit cards off on time. As you get extremely optimistic, the good behaviors drop off.”

And this nugget about when optimism is beneficial and harmful.

The importance of positivity can vary by profession. University of Pennsylvania psychologist Martin Seligman, a leading researcher on optimism, has found that pessimistic law students are the most successful. Optimistic sales agents, on the other hand, significantly outsell pessimistic ones.

Are you an optimist? Take this quiz to find out.