![]() ![]() ![]() OPTIMISM BIAS – This is one of those topics that has a name that makes it seem like you MIGHT know what it is…but you potentially don’t know for sure…and you probably don’t realize how much it impacts you and your customers every day.This episode explores why we think this way and how understanding optimism bias can be used to improve our businesses. So, what is optimism bias? Essentially, this is our tendency to overweight the likelihood good things will happen to us, and underestimate the likelihood bad things will happen to us. I hope you’ve got your rose colored glasses, because here we go! This is one of those topics that has a name that makes it seem like you MIGHT know what it is…but you potentially don’t know for sure…and you probably don’t realize how much it impacts you and your customers every day. I recommend A loan officer ben lee contact email: & Whatsapp Number :+1-98 to anyone looking for a loan in any market.Today’s behavioral economics foundations episode is all about the optimism bias. From pre-approval to closing- the journey was so seamless and I consider myself lucky because I’ve heard horror stories about the internet. But as a buyer I appreciated being walked through the process in a succinct yet thorough fashion. ![]() I closed so quickly my realtor and the seller of course were excited about that. He said he would meet those expectations but he surpassed them. He’s also very straightforward, I explained to him what my expectations were in terms of closing time and other particulars. He made himself available to me at pretty much any hour via email and texts, he was very responsive and knowledgeable. Lee Ben ( A Loan Officer), I was entering the market as a first time home buyer.My needs were a bit different and I had loads of questions, before he sent me my pre-approval letter, he called to speak with me about what it meant and what could change. Thinking small, taking two insurance policies and reminding ourselves morning and evening that we don’t know much about the future and having some discipline and quality control over the decisions we need to make may help cure the irrationality around optimism. He suggests ways to adjust to some humility about how much we understand the world we live in. One of my intellectual heroes of our time, Nassim Taleb in this latest book “How to live in a world that we do not understand” underscores this very point of future uncertainty and irrational optimism thereby. By putting the right set of processes and safeguards, they may be able reduce or discourage over-optimism. ![]() Now a very relevant question is – what is the remedy of irrational optimism? Can we escape from it? A raft of research in psychology and behavioural economics indicate that as individuals we are very ill equipped to handle irrational optimism. Irrationality and optimism are at the very heart of any economic bubble. Over-optimism of a very large number of people about their repayment capacity on mortgages led to the housing bubble and recession in the United States. Over-optimism may create organizational biases as well- for example when the management takes an optimistic business call, dissenting or doubting voice is equated with disloyalty.Ĭollective optimism can also lead to large-scale disasters. Those who are in sales would know that over-optimism tends to produce over-commitment. In business optimism not only generates unrealistic forecasts, but also leads managers to underestimate future challenges more subtly – for instance, by ignoring the risk of a clash with an incumbent competition while entering into a particular segment. Almost all of us are irrationally optimistic about our health and lifespan- all of us like to think that we will live long. Even drivers laid up after an accident caused by them, genuinely refuse to accept that they have poor driving skill. For example almost all of us believe ourselves in the top 20 per cent of the population when it comes to driving, pleasing a partner, or managing business. Optimism often leads us towards beliefs and opinions which are not rational. For all the virtues of optimism, there is an unmistakable play of cognitive bias from which it is almost impossible for us to escape. But optimism sits squarely on the right side of realism on our mental continuum. ![]()
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