Bad Choices/Good People
I’ve heard about folks making unfortunate investment decisions during these stressful times. Although none of us is immune to being somewhat impulsive or to making bad choices, some are more prone than others. Both overly-pessimistic and overly-optimistic people (who annoy and delight pragmatists like me) may be more susceptible to making bad investments.
Why Bad Choices Happen to Good People
In researching my hunch that overly-optimistic people make more than their fair share of bad business decisions, I found an suitably-named 2018 study, “Curb Your Enthusiasm.” The study found that entrepreneurs, who were above-average on the optimism scale, made less money from their investments than others, and that those optimists, who started companies based on a great idea, were more likely to fail than their less-optimistic brethren.
The take-away from this study is that very optimistic folks may be less grounded in reality. Lest you think this cautionary tale applies only to entrepreneurs, the study also included future divorcees who scored high on optimism.
Pessimism, however, is no panacea for making bad choices. Overly-pessimistic people often make financial decisions (as well as other types of decisions) based on fear, not reality.
Researchers from Duke University corroborate the verdict that the extremes on optimism scales don’t make prudent decisions. A moderate amount of optimism is desirable; overly-optimistic or overly-pessimistic decision-makers make bad choices.
Optimism Bias
Optimism bias is the unfounded belief that negative events will not befall us. Interpreting unfavorable news through a positive filter has been observed in the medical profession and may lead to end-of-life overtreatment directed by patients or their families.
Optimism bias can also lead to lack of preventive care. If one feels invincible, preventive screenings and doctors’ visits seem frivolous.
A dear friend, one of the most optimistic people I knew, died earlier this year. He did not have the preventive screenings that may have saved his life, and up until his final breath, he was counting on a miracle to save him. Some would call this attitude heroic; others would say it was foolish optimism.
We see optimism bias at play when people fail to plan for their retirement, or even for their present reality. Most people don’t plan for retirement or for a rainy day. For those living hand-to-mouth, this is understandable. But for the rest of the population, optimism bias may be responsible. “I’ll just work longer” is the attitude, not factoring in lay-offs, sickness and other setbacks.
During our current pandemic, I’ve observed optimism bias as people boast about being healthy and somehow immune to catching new viruses. Nothing bad can happen to me (or my loved ones) is the epitome of optimism bias. Of course, our denier-in-chief is the primary initiator of optimism bias, which has put many people in harm’s way.
A Place Called Hope
When I conduct small-group workshops, I often ask participants to define their sources of hope. I also ask them to identify how hope (or lack thereof) has affected their decision-making. Obvious to me, these are self-selecting groups; hopeless individuals do not often attend personal growth workshops.
Hope is what many oncologists peddle. When an adverse diagnosis comes our way, we want to hear that it could be cured. The downside of offering hope is that it may lead to overtreatment and more suffering in the precious little time late-stage cancer patients have remaining.
One of the big benefits of hope, however, is that a sense of hope has been found to reduce stress. Some researchers and psychologists distinguish hope from optimism. Optimism is passive, while hope can and should be active.
In his book, Anatomy of Hope, oncologist Jerome Groopman explains that hope doesn’t require positive thinking nor filtering news through rose-colored glasses. Hope acknowledges the challenges but gives us courage to tackle these challenges.
Clearly, hope, alone, does not always lead to good decision-making. In fact, “false hope” (based on wishes that a negative event will turn out to be positive) often leads to intemperate or unwise choices. Karin Sieger, a UK psychotherapist coping with recurrent cancer, suggests that offering “false hope” to try to reassure someone facing end-of-life issues is not helpful. Instead she recommends “meaningful hope”, the ability to recognize and regulate one’s anxieties.
Just this week, I experienced, first-hand, the lure of false hope and its dangers. A neighbor sent me an email that was supposedly from his employer, Stanford Health. The memo outlined steps that could be taken to prevent coronavirus, which were not true; the memo was fake. I sent it to some friends and colleagues before notifying them it was fake. They, in turn, sent it to their friends and colleagues.
For the period of time when I thought the memo was real, I felt better. But the danger with believing “false prophets” is that the recommendations wouldn’t work to prevent the virus and could lead to risky behavior while believing one had the inside track on preventing infection.
Hope tempered with a heavy dose of realism is what we all need to choose wisely. In Dr. Groopman’s words: “True hope has no room for delusion.” Here’s hoping you stay healthy while taking necessary precautions and managing your anxiety.