Optimism

Behavioral New World

January 1, 2026

Happy New Year!

May your year be filled with better decisions, courtesy of behavioral economics. Let’s start with optimism.

My newsletter of February 2024 (link here) looked at negativity bias. There I wrote, “A reasonable explanation is that we inherited this tendency from our ancestors for whom negative events could be life-or-death situations, e.g., being attacked by a wildebeest suffering from wasting disease.”

And yet, there is also a positivity bias—optimism. Indeed, there is a whole book devoted to it, The Optimism Bias. The author, Dr. Tali Sharot, reports that about 80% of people have a typically “mild” optimism bias. She argues that optimism (arising from the “irrationally positive brain”) is largely beneficial. For example, it serves to motivate us (think: an entrepreneur), reduces stress, and is generally good for our mental health.

My focus here is on individual optimism. But we might ask whether optimism varies across countries. The answer is Yes. In late November and early October 2025, a survey (link) of about 24,000 adults across 30 countries showed that 71% agreed with the statement, “I am optimistic that 2026 will be a better year for me than it was in 2025.” The most optimistic country? Indonesia at 90%. The least? France, at 41%. (Indonesia was hit by Cyclone Senyar in late November, so Indonesia’s optimism might be lower if we did the survey today.)

An inspirational example of the benefits of optimism is the life of Viktor Frankl. You may have read his book, Man’s Search for Meaning, about his time in a Nazi concentration camp. During that time, he observed who survived and who did not. Some people gave up hope while others remained optimistic. He concluded that people’s attitudes influenced whether or not they survived and later articulated his “Tragic Optimism”:

“An optimism in the face of tragedy and in view of the human potential which at its best always allows for: (1) turning suffering into a human achievement and accomplishment; (2) deriving from guilt the opportunity to change oneself for the better; and (3) deriving from life’s transitoriness an incentive to take responsible action.” (emphasis added)

As suggested by Frankl, we can influence the strength of our optimism, perhaps moving it from “mild” to “strong,” to reap the benefits of optimism. In fact, there is a long history of “the power of positive thinking,” the title of an influential book by Norman Vincent Peale published in 1952. Arguably, the idea goes back at least as far as the Epicureans, who—c. 300 BCE—suggested that we adopt a “hopeful disposition”.

But optimism can go too far. At the macro level, unchecked optimism contributed to the financial crisis of 2008-09. The behavioral scientist Peter Ubel writes (link), “…people were susceptible to what behavioral scientists like me call unrealistic optimism: They were convinced that their interest rates would not rise; or they were confident that their salaries would rise faster than their mortgage payments; or they were certain that their house would grow in value...”

At the individual level, it is not helpful to be optimistic that you can outrun a bear. (An outrun-the-bear joke is here.) On a less humorous note, consider the book The Secret, which describes the Law of Attraction, which can be thought of as a type of extreme optimism. The Law of Attraction, in short: think of positive things, and they will materialize; think of negative things, and they will materialize.

One of many downsides to the Law of Attraction is that, given its focus on thinking, it reduces the incentive to take action. The Law of Attraction also makes for victim-blaming, e.g., you’re suffering in Darfur because you’re not visualizing vividly enough. You’re not rich because you’re not thinking in the right way about wealth. And so forth.

The Law of Attraction is not built on an evidence-based foundation. One article (link) summarizes it this way: “[The] Law of Attraction is pseudoscience with conclusions based on erroneous, unfounded, and incorrect assumptions.” In addition to victim-blaming, the article lists 10 negative outcomes associated with the Law of Attraction way of thinking.

TL;DR: (1) There are both negativity and positivity biases, (2) each can play a helpful role in our lives, (3) as suggested by Viktor Frankl, Norman Vincent Peale, and others, the level of one’s optimism can be changed to some degree, and (4) optimism can be overdone.

The challenge: When should we be optimistic, when should we be pessimistic (negative bias)? I suggest that context is important. Being overly optimistic that your daughter’s softball team will win the next game is probably benign. Being optimistic that your investments will return 20% per year could leave you in (relative) poverty in retirement.

In addition to consideration of context, perhaps others can guide us toward an optimal level of optimism (or pessimism). I’ve written about the role that a devil’s advocate can play in making better decisions here.

You might consider having a personal board of directors that you can consult in the context of making important decisions; ask them, “Am I being too optimistic? Too pessimistic?” You can also conduct a pre-mortem (discussed here) on important decisions: “What am I overlooking that could go wrong? What if I’m being too optimistic about this opportunity?”

There are certainly reasons to be pessimistic about 2026, but I choose to start the new year optimistic that behavioral economics can make our lives, and the lives of those around us, better. How ‘bout you? Feel free to comment below.