We live in the era of positive thinking. Self-help books and Personal Growth gurus have long touted it as the key to happiness, good health, and longevity. However, more and more scientific studies indicate that positive thinking also has a “darker” side, especially when it is trivialized.
A group of psychologists from the University of Bath have shown that an excessively optimistic attitude can push us to make bad decisions, the implications of which can be particularly disastrous for our personal finances and, therefore, for our long-term life.
The more positive thinking grows, the more cognitive abilities decrease
The study in question analyzed data from a survey carried out in the United Kingdom of more than 36,000 households and examined people’s expectations about their financial well-being, comparing them with their real possibilities and the economic results they were obtaining.
This psychologist discovered that people with greater cognitive ability were 22% more likely to have realistic thinking; that is, they were more objective and pragmatic. In contrast, people with lower cognitive ability were 35% more likely to embrace extreme optimism.
The least developed cognitive skills in excessively optimistic people were: memory, verbal fluency, numerical reasoning and fluid intelligence. The latter is the ability to solve new problems without using previous knowledge and personal experiences. In other words, it is what allows us to analyze the elements of a new problem and understand the relationships between apparently unrelated things to find original solutions.
This researcher also found that people with greater cognitive ability tend to have more realistic expectations for the future, even seasoned with a pinch of pessimism. In practice, these people applied one of the basic principles of Stoic philosophy: “We must foresee all possibilities and strengthen the spirit to deal with the things that might happen,” in the words of Seneca. Or in other words, they use strategic negativism that allows them to prepare for the worst in the best way.
Intelligence helps us offset the effects of optimism bias
Predicting the future accurately is difficult – and sometimes downright impossible – but we can project ourselves back in time and imagine what it will be like. Based on these expectations we set goals and draw up a life plan.
In general, we tend to have an optimistic bias that helps us keep going when everything around us seems to be falling apart. Also known as the Pollyanna Principle, discovered by Margaret Matlin and David Stang in 1978, it indicates that we tend to be more optimistic than pessimistic.
As a rule, we place more importance on the positive and often hope for the best even if we do not have data to support that prediction. We also tend to remember more positive events than negative ones, and often when we look back, we do so with rose-colored glasses.
According to these psychologists, “Cognitive processes selectively favor the processing of pleasant information over unpleasant one.” This tendency helps us nurture hope and have a more positive vision of the future, which allows us to function better in our daily lives and even “softens” our interactions with other people.
However, clinging to a staunchly positive vision can make us fall into toxic optimism. Everything seems to indicate that people with more developed cognitive abilities are capable of overriding this automatic response when making important decisions.
On the other hand, people with lower cognitive capacity, who have not sufficiently developed their fluid intelligence, cling more to positive biases that, to a certain extent, lead them to self-deception. This excess of optimism causes them to make more errors in their judgments and foster more unrealistic expectations.
Excessive optimism pushes us to make bad decisions
Life projects should help us achieve our dreams, but we must make sure we build a solid plan to achieve them. Overly optimistic beliefs that do not take into account reality or our capabilities can lead us to make bad decisions and, according to this study, will generate worse results than we would obtain by nurturing more realistic expectations.
Decisions about economic aspects that have a significant impact on our lives, such as choosing a job, saving or investing, always involve a certain level of risk and uncertainty, so it is important to make them by analyzing as many variables as possible in an objective way.
If we feed excessively optimistic economic expectations, for example, we can increase our level of consumption to unsustainable levels, taking on too much debt and/or not saving enough. We could also undertake bad businesses with a high probability of failure, allowing ourselves to be carried away by excessive and unfounded optimism.
In short, underestimating the negative and accentuating the positive is not always the best strategy to achieve our goals. The concept of positive thinking is deeply rooted in our culture, but it would be healthy – and convenient – to review how we apply it when making relevant decisions because, in some cases, it could do more harm than good. As Ayn Rand wrote, “We can avoid reality, but we cannot escape the consequences of avoiding reality.”
Dawson, C. (2023) Looking on the (B)right Side of Life: Cognitive Ability and Miscalibrated Financial Expectations. Personality and Social Psychology Bulletin; 10.1177.
Matlin, M. W. & Stang, D. J. (1978) The Pollyanna Principle: Selectivity in language, memory, and thought. Cambridge, MA, US: Schenkman.