11/7/2023 0 Comments Optimism bias examples![]() But “pervasive optimistic bias” can be detrimental: “Most of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be.” For example, only 35 percent of small businesses survive in the U.S. “One of the benefits of an optimistic temperament is that it encourages persistence in the face of obstacles,” Kahneman explains. Isn’t optimistic risk taking integral to building a successful business? Yes, to a point. “The study of CFOs showed that those who were most confident and optimistic about the S&P index were also overconfident and optimistic about the prospects of their own firm, which went on to take more risk than others,” Kahneman notes. Research shows that chief financial officers, for example, “were grossly overconfident about their ability to forecast the market” when tested by Duke University professors who collected 11,600 CFO forecasts and matched them to market outcomes and found a correlation of less than zero. I’ll bet 90 percent of you think you are, too, because this is the well-documented phenomenon known as the above-average effect, part of the psychology of optimism.Īccording to psychologist Daniel Kahneman, in his 2011 book Thinking, Fast and Slow, “people tend to be overly optimistic about their relative standing on any activity in which they do moderately well.” But optimism can slide dangerously into overoptimism. Are you better than average as a driver? I know I am.
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