|Overview: Optimism Bias|
|Definition||The tendency for excitement for the future to result in underestimates of costs and risk and overestimates of returns.|
|Related Concepts||Positive Risk|
What is Optimism Bias?
John Spacey, updated on March 01, 2016
Optimism Bias is a tendency for judgment to be clouded by excitement for the future. It typically results in underestimates of cost and risk and overestimates of returns associated with a particular strategy or action. In many cases, early phases of a project or initiative begin with optimism and decline towards pessimism as problems materialize. Optimism is also a personality trait that is considered an admirable quality associated with youth, resilience and willingness to take risk. Although optimism bias results in inaccurate predictions, in some cases it causes an organization to take risks that end up paying off even if they were more expensive than anticipated.Japan's bullet train system, known as Shinkansen, began in 1958 with overly optimistic estimates that resulted in actual costs nearly doubling planned budget. Nevertheless, the system became remarkably successful and a source of competitive advantage for Japan's economy. It was also an early symbol of Japanese technical abilities that is still a source of national pride. It is widely acknowledged that the system would have never been built if initial cost estimates had been realistic. Not all optimism bias works out so well. It is a common source of expensive and tragic failures.
Cognitive BiasesThis is the complete list of articles we have written about cognitive biases.
If you enjoyed this page, please consider bookmarking Simplicable.
Cognitive BiasesA list of common cognitive biases explained.
Curse Of Knowledge
Why experts have trouble communicating.
A cognitive bias that is well known in marketing circles.
Biases vs Heuristics
The difference between biases and heuristics.
A definition of information cascade with examples.
A definition of functional fixedness with examples.
Boil The Frog
A definition of boil the frog, with examples.
The definition of anecdotal evidence with examples.
The definition of scientism with examples.
Thought ProcessesA list of thinking approaches and types.
LogicA few logic terms explained.
A few dangers of being too abstract.
Objective vs Subjective
The difference between objective and subjective.
Intellectual DiversityA definition of intellectual diversity with examples.
Creative ValueThe definition of creative value with examples.
Benefit Of Doubt
The definition of benefit of doubt with examples.
The definition of pessimism with examples.
TrendingThe most popular articles on Simplicable in the past day.
New ArticlesRecent posts or updates on Simplicable. Site Map
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.