Optimism Bias: What It Is, How It Affects You
Optimism bias has been called “one of the greatest deceptions of which the human mind is capable” and “the engine of capitalism.” But how does it work, and is it good for you?
Almost a hundred years ago, when Geoffrey Faber founded what would become Faber & Faber, the renowned London publishing house, he was so certain of his venture that he bet his mother’s, his own, and his friends’ fortunes on it, concluding, “everybody would benefit … with a substantial income” (emphasis in the original).*
A year later, the new publishing house was in its first of several near-bankruptcies, and Faber wrote in his diary:
“I find it hard to justify my buoyant self-confidence of last year … I ought, I think, to have foreseen trouble and gone more cautiously.”
That’s optimism bias and what it does to individuals and businesses. Geoffrey Faber is not the only entrepreneur to have been tripped up like this. It’s typical. What’s less typical is that Faber & Faber survived to tell the story. Most companies fail and are forgotten.
You would never get on a plane if you overheard the pilot say to the co-pilot, “I’m optimistic…
