How to Choose –  SHOW NOTES

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Season 3, Episode 7: Optimism Bias

Tessa Mudge & Ken Smith

INTRO

Optimism bias refers to our tendency to overestimate the likelihood of experiencing positive events and underestimate the likelihood of experiencing negative events. An unfounded optimism can actually cause you to choose behaviours that are not in your best interest, because you underestimate the chance that bad things will happen to you.

KEY TAKEAWAYS

This is not about suppressing your optimism! But about not being naively optimistic. We don’t tend to update our beliefs with negative information as much as we do when compared to positive information.

LINKS

Check out the TED talk by neuroscientist Tali Sharot which describes how optimism can act as a self-fulfilling prophecy. By believing that we will be successful, people are in fact more likely to be successful. This kind of optimism enhances well-being by creating a sense of anticipation about the future.

We referred to the likelihood of getting into a crash in Australia. To explore these statistics further check out these websites including on the much higher rates of young men in crashes.

Studies have found that those who expect success at exams may get over-confident and fail to prepare for tests as well as their more anxious peers.

WHAT TO DO?

To avoid the optimism bias you can use base rates, which if you missed it was discussed in episode 6 of this season! Base rates provide quantitative data to anchor our judgements, so they get us out of our emotional subconscious, reflexive decision making heads. Base rates can be the probability of an event occurring, the average time something takes, or whatever figure fits the situation–as long as the base rate is from existing data.

 Another way to avoid this bias it to try the ‘premortem approach’ which helps you predict areas of potential failure when starting a project. You, or your team need to imagine a year into the future when your project has failed. Write down what has gone wrong and why. By considering negative outcomes, we can resist the shortsightedness of optimism bias.

IN OUR NEXT EPISODE…

In our next episode we will be learning all about loss aversion.

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