HR Management & Compliance

Optimism Bias

Popular culture is awash with overt and subconscious messages instructing us to think positively. From children’s stories about the “Little Engine that Could” and his mantra of “I think I can. I think I can” to self-help books for adults professing the genuine, mystical power of positive thought, the message is clear: It’s positive to think positively.

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Benefits to Being Optimistic

There are certainly benefits to being optimistic. Countless achievements could not have been accomplished had the achievers doubted their chances of success and not tried. But the issue is not completely one-sided. Too much—or, more accurately, too unrealistic—optimism can be detrimental to individuals and organizations.

“Optimism bias” describes overestimating the likelihood of positive outcomes and underestimating the likelihood of negative outcomes. When considered in these terms, it’s easy to understand how being too optimistic can cause problems for businesses and individuals.

But Not Too Optimistic

Imagine a company that consistently overestimates the profitability of new product launches or downplays the likelihood of a market downturn or an employee who overestimates his or her ability to complete a major project on time. Such companies and individuals set themselves up for failure by not being realistic about the potential outcomes.

“Thinking positively is an evolutionary hallmark, because it facilitates envisioning what is possible, allowing us to be courageous and innovative,” writes Jessica Mudditt in an article for BBC Worklife. “Levels of optimism bias vary according to our mental state and current circumstances, and there are ways to temper or increase it. That’s good, because a surfeit of optimism can lead to underestimating risk. Understanding where you sit on the optimism spectrum can help you adjust for your bias – and maybe even make better choices.”   

In other words, it can help to ground yourself when it comes to setting expectations about the future. A great way to do this is to look at objective data, about both yourself and the broader world. For example, employees estimating how much time it will take them to complete a project can consider how much time it took them to complete similar projects in the past. Similarly, a company predicting the profitability of a new product launch can consider its own history and look at industrywide benchmarks. In both cases, it’s not realistic to assume an individual’s or a company’s performance will dramatically exceed existing examples.

In general, there’s nothing wrong with having a positive, can-do attitude; however, when planning for the future and facing high stakes, it’s appropriate to put that optimism into the context of measurable realities to avoid the harmful consequences of unchecked optimism and unrealistic expectations.