Optimism bias, sometimes referred to as unrealistic bias or comparative optimism, is generally used to refer to one of two powerful cognitive biases:
- A person believing he or she is less likely to experience a negative event than members of the general population with statistically identical risk factors.
- A person believing that the future is much more likely to turn out better, often exponentially better, than their past or present.
Optimism bias exerts itself in both positive and negative events.
Examples of Positive Optimism Bias
- Investors believing, without justification, experience, or a full understanding of the people against which they are competing, they will achieve higher-than-average returns on capital.
- Non-athletes assuming they can
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This can result in sub-optimal risk exposures or behavior more likely to lead to death, bankruptcy, or other personal harm.