On Optimism

"How is it that people remain optimistic even though information challenging those predictions is abundantly available?"

"It turns out it is not commencement speeches or self-help books that make us hopeful. Recently, with the development of non-invasive brain imaging techniques, we have gathered evidence that suggests our brains are hard-wired to be unrealistically optimistic. When we learn what the future may hold, our neurons efficiently encode unexpectedly good information, but fail to incorporate information that is unexpectedly bad."

Sometimes Optimism is not your friend

That’s why when we listen to Oprah Winfrey’s rags-to-riches story our brain takes note and concludes that we too may become immensely rich and powerful one day; but when told the likelihood of being unemployed is almost 1 in 10 or of suffering from cancer is over 1 in 3 we take no notice.

Such optimistic illusions, with all of their advantages, unfortunately come at a price. Underestimating risk makes us less likely to practice safe sex, save for retirement, buy insurance or undergo medical screenings.

In some cases relatively minor biases can even lead to global disaster. Take the financial crisis of 2008. Each investor, homeowner, banker or economic regulator expected slightly better profits than were realistically warranted. On its own, each bias would not have created huge losses. Yet when combined in one market they produced a giant financial bubble that did just that.