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Robin Powell: Generally speaking, it’s a good thing to have a positive outlook on life, and to be optimistic about the future. It’s better for our health and mental wellbeing for a start. But there are potential pitfalls too. Lisa Bortolotti is Professor of Philosophy at the University of Birmingham and an authority on the dangers of overoptimism and overconfidence.
Lisa Bortolotti: I think, where you see the negative effect is where you have context, where things are so complicated that being optimistic about your competence or your performance leads you to
Robin Powell: A tendency towards Optimistic Bias or unrealistic optimism is part of the human psyche. It’s the way we’ve evolved. Behavioural experts have identified different aspects to it. One of these they
Lisa Bortolotti: The Illusion of Control is when something is happening and we witness the thing happening and we tend to think that we are actually interfering with what is happening and determining the outcome. And, I think, in the financial world it’s possible that we may think that we will be able to know whether a certain company will be successful or whether certain rates will go up or down. And this capacity, that we think we have to predict how things will go, will make us make decisions that are
Robin Powell: Another aspect of optimism bias is the so-called Illusion of Superiority. In other words, thinking we’re better than we actually are.
Lisa Bortolotti: The Superiority Bias, which is also called the Better Than Average Effect, is the idea that we tend to think of ourselves as better than average - in a number of
Robin Powell: Again, it’s good to be optimistic and confident to a point. In fact, you need to have a positive view of the future to invest in