BY DEFAULT, most of us are optimistic beings: even when we are at our lowest, we are able to discover a glimmer of hope, a silver lining wrapped around a dark night.
We are biased towards optimism, which leads us to underestimate the risk of something bad happening to us and overestimates the probability of something good happening to us.
In a much less exciting way, we share the spirit of movie superheroes, who just won’t give up fighting, regardless of being very badly outnumbered.
This bias actually does a lot of good on a global scale. Our bias towards optimism has led to great achievements in science, infrastructure and politics.
Nations and individuals have pushed boundaries, not wanting to know that the odds were stacked against them.
If they had known the difficult journey ahead of them, they might never have started.
People have walked on the moon, travelled to the depths of our oceans and build monuments that have survived for millennia.
On the individual level, our optimism is also useful. It prevents us from descending into apathy.
Who would choose to marry knowing in Malaysia every 10 minutes a couple files for divorce? The optimism bias will lead you to think that this statistic applies to other people, but not your own marriage.
Which restaurants and cafés would we be able to visit if entrepreneurs would act on the high failure rate of these businesses and never get started in the first place?
Our optimism bias ensures we are not becoming a real-life Homer Simpson, who famously said: “Trying is the first step towards failure.”
In fact, our optimism can actually lead to success in a variety of fields. As your optimism influences your behaviour, it can thereby actually change your future. It won’t take long before your optimism turns into a self-fulfilling prophecy.
Nonetheless, it is not all daisies and rainbows. There are things you could become less optimistic about.
Our optimism bias makes us skip our seat belts, as we underestimate the probability of being in a traffic accident.
Many are chronically underinsured because we wrongly think fire, flood, crime or sickness affects others, not us.
And when we engage in retirement planning, we plan for a best case scenario and hardly ever save enough for a bad case scenario, let alone, a worst case scenario.
So how do we find the balance between reaping the benefits of unrealistic optimism, while steering clear from its more dangerous aspects?
Whenever you have to estimate something, ask yourself what is more dangerous: being too optimistic, or being too pessimistic?
In the case of traffic accidents and retirement planning, being too optimistic could lead you to forego seat belts and an empty bank account at age 65, both quite dangerous.
Being too pessimistic seems like a much lesser evil in these cases.
On the other hand, being optimistic about your job prospects (and acting the part!) might actually advance your career, while there is much less advantage of being pessimistic or even realistic.
The good things that come to those who wait, may simply be the things that were left behind by those that got there first.
Mark Reijman is co-founder and managing director of http://www.comparehero.my/, dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, loans and broadband plans in Malaysia.
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