Are you too optimistic about the future of your business?

At the start of the week, a student popped into my office for a chat. Nothing unusual about that; it happens all the time for lecturers. However, there are not many students around at the moment because they are busy revising or taking exams. The student was clearly a little nervous about her impending assessment, but I tried to be reassuring. Then she said, “I always enjoy coming to speak with you. You are always so positive.”

I hope I did not show it, but that was a worrying comment for me because I had just been reading some research which made a rather negative connection between positivity and cognitive ability. Research from the University of Bath has found a link between unrealistic optimism and cognitive skills. It turns out that the most optimistic people tend to have lower levels of cognitive skills, such as analytical thinking.

The study looked at people’s financial predictions. Those who made the most optimistic forecasts had lower levels of cognitive skills than those who were realistic or pessimistic. In other words, it looks like optimists do not think as deeply as those who are realistic.

This is not news in psychology. Our “optimism bias” is well established. Indeed, it is easily visible in the workplace when you use “SMART” goal setting. In fact, it is anything but SMART and there is a wide body of evidence that shows that such goal setting just doesn’t work. One reason is “optimism bias”. People tend to think they can achieve more than they can. Or they believe they can do it faster than is possible. The result is that they do not achieve their so-called “SMART” goals.

Part of the reason for an optimism bias is thought to be because of our desire to be in control of our own lives. Pessimistic thinking makes us realise we are not in control. Lack of control is frightening for us because it could mean there is a potential threat to our survival. This means, for example, that when that salesperson is selling you the latest home appliance and says “would you like this covered by our insurance?” you say “no thank you”. If you accept the insurance, you are being pessimistic as you will be accepting something could go wrong. Instead, your survival instinct kicks in, telling you are in control and therefore nothing will break, so you don’t need the insurance. You reassure yourself by thinking that other people probably need insurance, but it’s not for the likes of you.

The need for our brain to convince us we are in control forces us to be optimistic. As a result, we stop thinking. The study from Bath shows that people who do not analyse things deeply make the most optimistic predictions. Their brains have fallen into the “I’m alright, Jack” frame of mind. That’s the territory inhabited my many politicians in the UK right now. “I’m not going to lose my seat in an election next year; it’s the other MPs who need to worry.”

Indeed, many Western politicians may now be concerned about their optimism bias and lack of depth of thought about the war in Ukraine. Right at the start, Putin said that the West would eventually give up supporting Ukraine, allowing him to waltz right in. Nobody believed him. Indeed, we had Western politicians lining up to say the war would be over in weeks. It looks like their lack of analytical thinking back at the start of 2022 did not prepare them for the patience of Putin.

Remember too at the beginning of 2020 when we were told that Covid would be over in a matter of weeks? Pundits predicted that we’d only need three weeks of lockdowns and then life would go back to normal. Once again, the optimism bias kicked in, and did not allow adequate critical analysis of the situation. Only now, with the Covid Inquiry, are we discovering how little thought there was in various parts of the Government.

Depth of thought and other associated cognitive skills appear to be linked to our ability to be realistic. If we do not think deeply enough, we tend to be over optimistic. So how can you prevent the “optimism bias” from affecting your work and your business?

One thing that helps is to start with the assumption that whatever task or project you are working on has failed. Then you try to consider all the reasons it could have failed. This allows you to work out the potential pitfalls in advance, thereby having a more realistic idea of what is possible. The trick here is not to start looking forward. You need to start your thinking at the end of the project when it “has failed”. Think about that happening and what caused it.

Another way of dealing with the optimism bias is to consider the “availability heuristic”. A heuristic is a shortcut way of thinking. The availability heuristic suggests to us that if we can easily recall something because it is easily available to our brain, then it must occur more often. This means that we tend to believe something is more likely to happen because we can more easily recall similar events. For example, it is easy for us to recall news stories of plane crashes because they are so dramatic. Hence, when we get on a plane, we tend to worry about it crashing because we can recall an example of that happening. Our ability to recall something is disproportionate to the actual risk. In the office, this means analysing things based on availability heuristics. Do we think something is likely to occur simply because we can easily recall an instance of it? By considering this, we can avoid the optimism that such thinking leads to.

Techniques like this can help you avoid the optimism bias in the workplace. They encourage deeper thinking and taking a more analytical approach. As the research at the University of Bath shows, without this level of analysis, we could end up being more optimistic than is good for our business. It’s a common problem which can be avoided with just a little extra thought. When your brain tries to come up with an answer and signals to you it’s time to stop thinking, that’s the danger point leading to excessive optimism. Don’t let your own brain fool you into avoiding extra thought. That’s the way that many men go when thinking about buying Christmas presents. Their optimism bias suggests “it will be fine” to leave the shopping until the afternoon of Christmas Eve…! ?Oops…!