The 25 Cognitive Biases: The Optimism Bias

This article is an excerpt from the Shortform book guide to "Poor Charlie's Almanack" by Charles T. Munger. Shortform has the world's best summaries and analyses of books you should be reading.

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What is the optimism bias? How do you curb unrealistic optimism?

The optimism bias is the tendency to believe that you are less likely to have a negative experience and be overconfident in your chances of experiencing positive events. It is this cognitive bias that fuels gambling. You can control the tendency by habitually using probability maths in your decision-making process.

Read on to learn more about the optimism bias.

What Is the Optimism Bias?

People tend to believe things will work out.

“What a man wishes, that also will he believe.”—Demosthenes

Why It Evolved

Hope spurs action. If you’re optimistic that you’ll survive and a food source is right around the corner, you’ll continue trying to survive. In contrast, a pessimistic depression dampens the very behaviors that would encourage survival. 

How It Can Be Harmful

Denial of bad news and over-optimistic ignorance of risk factors leads to poor decision-making.

Examples

People buy lottery tickets and overestimate their chances of winning

Antidotes

To curb the optimism bias, habitually use probability math in your decisions. Your mental heuristics for chance are not adequate, the same way that your intuitive golf grip is nowhere as effective as the unnatural ones now used by professionals.

The Optimism Bias: Curb Your Expectations

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  • A collection of Charlie Munger’s best advice given over 30 years
  • Why you need to know what you’re good at and what you’re bad at to make decisions
  • Descriptions of the 25 psychological biases that distort how you see the world

Joseph Adebisi

Joseph has had a lifelong obsession with reading and acquiring new knowledge. He reads and writes for a living, and reads some more when he is supposedly taking a break from work. The first literature he read as a kid were Shakespeare's plays. Not surprisingly, he barely understood any of it. His favorite fiction authors are Tom Clancy, Ted Bell, and John Grisham. His preferred non-fiction genres are history, philosophy, business & economics, and instructional guides.

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