Optimism bias is a tendency for individuals to systematically overestimate their likelihood of experiencing positive outcomes and underestimate their likelihood of experiencing negative outcomes.
EXAMPLE
A university student believes they can study the night before every exam and still score top grades because it worked once before. They ignore past failures and growing syllabus difficulty.
As exams approach, stress builds, preparation suffers, and results disappoint. Their optimism bias convinced them success was guaranteed until reality proved otherwise.
While optimism can boost motivation and mental well-being, optimism bias often leads to poor decisions, underestimating risks, and avoidable failures in health, finance, relationships, and careers.
What Is Optimism Bias?
Optimism bias is a cognitive bias that makes people believe that they are less likely than others to experience negative events and more likely to enjoy positive outcomes, even when evidence suggests otherwise. It’s because people believe they are more talented, healthier, safer, and luckier than the average person.
We have often heard people say, “Keep your expectations low”. This is because our brain has a natural ability to think unrealistically and develop mistaken positive beliefs.
In psychology, optimism bias explains why individuals think:
- They won’t get sick.
- Their business will succeed despite market risks.
- Their relationship will never fail.
- Their project will finish on time.
This bias creates a “personal immunity illusion”, where danger feels distant and unlikely. It reflects the brain’s natural preference for hope, control, and emotional control, even at the expense of realism.
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Why Do Humans Have Optimism Bias?
Let’s understand why humans exhibit optimism bias:
Self-enhancement motivation
We only see what we want to see. We constantly look for situations and scenarios that support our positive emotions. Cultivating optimistic predictions can feel satisfying and release dopamine, the feel-good emotion. This also leads us to another cognitive bias: overconfidence.
Perceived personal control
People tend to selectively update their beliefs to exercise a sense of control over their lives. This leads to optimism bias, as we make false assumptions about what will happen to us in the future.
Prior experience is associated with this, as people who have had positive experiences are more likely to make optimistic predictions. The greater the perceived control, the more hopeful the prediction. Also, the need to maintain a social image is what causes optimism bias.
Ego-centric thinking
One reason optimism bias occurs is ego-centric thinking. Individuals assume they possess better knowledge about specific circumstances than others. They fixate on their own viewpoint, a cognitive bias known as the egocentric bias. This leads to judgments and decisions that support optimism bias.
However, the only complication is that, since they have a better understanding of information related to them, they have difficulty understanding others’ knowledge.
What are the reasons humans develop optimism bias?
Self-enhancement motivation, perceived personal control, and ego-centric thinking are the main reasons humans develop optimism bias.
Optimism Bias vs Pessimism Bias
Here are the key differences between optimism and pessimism bias:
| Optimism Bias | Pessimism Bias |
|---|---|
| Expecting positive outcomes more than is realistic | Expecting negative outcomes more than is realistic |
| Underestimating risks | Overestimating risks |
| Boosts confidence and motivation | Increases caution but may cause anxiety |
| Linked to overconfidence | Linked to fear and doubt |
| Can cause poor planning | Can prevent action |
Optimism Bias Examples
The following are some typical examples of how optimism bias occurs in daily life:
Example 1: Optimism Bias In Health
Many smokers believe they won’t develop cancer because they “feel fine” or know someone who smoked without issues. Despite statistics, they think illness happens to others, not them.
This mindset delays quitting and medical screening, often with fatal consequences.
Example 2: Optimism Bias In Climate Change
Many people accept that climate change exists but believe it won’t personally affect them. This reduces urgency to change behaviour, despite growing evidence.
Example 3: Optimism Bias In Technology
Companies like Nokia once believed their dominance would last forever, ignoring competitors. Overconfidence delayed innovation and led to decline.
Example 4: Optimism Bias in Behavioural Finance
An investor puts most of their savings into one trending stock, convinced it will outperform the market. They ignore warnings about volatility, believing their choice is exceptional.
When the stock crashes, they realise optimism bias clouded their judgment.
Example 5: Optimism Bias in Psychology
Imagine students always get mediocre marks on their homework and tests. Despite this, they have an optimistic bias and think they will perform exceptionally well on future tests.
As a result, they need to set aside more time to study or seek further assistance.
Example 6: Optimism Bias in Project Management
Teams underestimate time and cost for projects, assuming everything will go smoothly. Delays, budget overruns, and burnout follow a pattern known as the planning fallacy.
Example 7: Optimism Bias in Estimating
An example of optimism bias in estimation is seen when a person is asked to estimate how long it will take to complete a task. Let’s say a software developer is given a new programming assignment.
Due to optimism bias, the developer may have a positive outlook and believe that they can complete the task much faster than it actually takes. They may underestimate the project’s complexity and overlook potential challenges.
Example 8: Optimism Bias in Economics
An example of optimism bias in economics can be observed in economic forecasting.
For example, during an economic upswing, there could be an overly pessimistic view that growth would continue indefinitely without accounting for potential constraints or cyclical tendencies.
This bias might be a factor in asset bubbles, speculative behaviour and resource misallocation by causing erroneous projections.
Psychology Behind Optimism Bias
From a psychological perspective, optimism bias serves as a coping mechanism:
- It reduces fear of uncertainty.
- It encourages persistence.
- It supports mental resistance.
However, when unchecked, it becomes a cognitive blind spot that distorts rational judgment.
Neuroscience research shows people update their beliefs more when hearing good news than bad news, which is a built-in imbalance in how the brain processes information.
Tips To Avoid Optimism Bias
Optimism bias has created havoc in the lives of many. It prevents us from seeing situations clearly and also affects mental health. If we set certain expectations and the reality is the opposite of what we wanted, we give up on growth and success. This affects our moral character and willpower as well.
Optimism bias exists in relationships as well. We overestimate someone’s care and love for us, which later on proves to be a significant setback.
However, here are some tips you can follow to avoid optimism bias:
- Gather all relevant information about the topic or circumstances.
- Conduct self-reflection and critical thinking in decision-making.
- Learn from negative experiences and avoid overconfidence.
- Avoid controlling situations and practice self-safety.
- Evaluate yourself and eliminate any unnecessary biases.
- Lower your expectations and welcome others’ advice to get a well-rounded viewpoint.
- Lastly, be objective in everything you do.
Optimism Bias vs Normalcy Bias
Here are the key differences between optimism bias and normalcy bias:
| Optimism Bias | Normalcy Bias |
|---|---|
| Belief that positive outcomes are more likely | Belief that things will stay the same |
| Underestimate personal risk | Underestimates change or disaster |
| Driven by hope | Driven by routine and familiarity |
| Example: “I won’t get sick”. |
Example: “This flood won’t be serious”. |
Why does understanding optimism bias matter?
Recognising optimism bias significantly helps you make:
- Make better financial decisions
- Improve health choices
- Plan realistically
- Build stronger relationships
- Lead more effectively
- Avoid preventable failures
Awareness transforms blind hope into informed optimism.
Frequently Asked Questions
The opposite of optimism bias is pessimism bias. It is a cognitive bias that involves overestimating negative experiences and underestimating the likelihood of positive events or experiences in life.
For example: A girl may be fully prepared for her Maths test, but she may think that she will fail it.
People experience optimism bias due to self-enhancement, perceived personal control and the need to maintain a social image. Moreover, ego-centric thinking is another major cause of optimism bias.
Gather all information related to the topic or circumstances and practise self-reflection to eliminate any unnecessary biases. Avoid overconfidence, lower your expectations and welcome advice from others to achieve a well-rounded viewpoint.
No. It can boost motivation and mental health, but it becomes harmful when it leads to ignoring risks and poor planning.
Optimism bias focuses on future outcomes, whereas overconfidence involves overestimating current abilities or knowledge.
