Why do we overestimate the probability of success?

The 

Optimism Bias

, explained.
Bias

What is Optimism Bias?

The optimism bias refers to our tendency to overestimate our likelihood of experiencing positive events and underestimate our likelihood of experiencing negative events.

An illustration labeled "Optimism Bias" shows a stick figure with a big smile standing on a flat surface, labeled "Expectation," with a finish line flag in the distance. Below, under the label "Reality," the same figure is shown falling into a deep pit filled with lava, illustrating the gap between optimistic expectations and harsh reality. The figure in the pit has a worried expression, highlighting the contrast between what was expected and what actually happened.

Where this bias occurs

Consider the following scenario: Tom is a bright and motivated entrepreneur who is in the midst of starting his own restaurant. Previously, six businesses failed in the same building he purchased. Each venture fell short of earning the necessary returns to stay afloat and was forced to close. However, Tom feels as though he has what it takes to make his restaurant a success. After all, he graduated at the top of his class, is overflowing with big ideas, and is in touch with the pulse of young city-goers.

Tom pours his time and money into the venture, refusing to yield to shortcomings or accept failure as an option. His friend warns him that the street layout and surrounding competition make it difficult to draw pedestrians into the area. Tom still feels he can overcome these obstacles with his expertise. However, Tom’s restaurant fails to sustain enough business and is unfortunately forced to shut down—just like the rest before him. 

In this scenario, Tom exhibits the optimism bias because he refuses to take into consideration the past six businesses that failed before him as well as the environmental factors working against him. However, Tom confidently believes he can outperform the rest because of his abilities as an entrepreneur. But at the end of the day, his likelihood of failing is statistically the same as everyone else's, resulting in his inevitable failure.

Related Biases

Sources

  1. Sharot, T. (2011). The optimism bias. Current Biology, 21(23), R941–R945. https://doi.org/10.1016/j.cub.2011.10.030
  2. Ibid.
  3. Ibid.
  4. Pahl, S., Sheppard, S., Boomsma, C., & Groves, C. (2014). Perceptions of time in relation to climate change. WIREs Climate Change, 5(3), 375–388. https://doi.org/10.1002/wcc.272
  5. Ibid.
  6. Heifetz, A., & Spiegel, Y. (2000). On the Evolutionary Emergence of Optimism (SSRN Scholarly Paper ID 247355). Social Science Research Network. https://doi.org/10.2139/ssrn.247355
  7. Strunk, D. R., Lopez, H., & DeRubeis, R. J. (2006). Depressive symptoms are associated with unrealistic negative predictions of future life events. Behaviour Research and Therapy, 44(6), 861–882. https://doi.org/10.1016/j.brat.2005.07.001
  8. Sharot, 2011.
  9. Sharot, 2011.
  10. Kahneman, D. (2013). Thinking, Fast and Slow (1st Edition). Farrar, Straus and Giroux.
  11. Weinstein, N. D. (1980). Unrealistic optimism about future life events. Journal of Personality and Social Psychology, 39(5), 806–820. https://doi.org/10.1037/0022-3514.39.5.806
  12. Chalmers, I., & Matthews, R. (2006). What are the implications of optimism bias in clinical research? The Lancet, 367(9509), 449–450. https://doi.org/10.1016/S0140-6736(06)68153-1
  13. Ibid.
  14.  Seaward, H. G. W., & Kemp, S. (2000). Optimism bias and student debt. New Zealand Journal of Psychology; Christchurch, 29(1), 17.

About the Authors

A man in a blue, striped shirt smiles while standing indoors, surrounded by green plants and modern office decor.

Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

A smiling man stands in an office, wearing a dark blazer and black shirt, with plants and glass-walled rooms in the background.

Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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