A new study concluded that people with excessive optimism are more likely to struggle with decision-making and could have lower cognitive function.
“Those highest on cognitive ability experience a 22% (53.2%) increase in the probability of realism (pessimism) and a 34.8% reduction in optimism compared with those lowest on cognitive ability,” reads the abstract of a University of Bath study published in Neuroscience News.
According to the study, people who have unrealistic optimism are more prone to “excessively risky behavior” and do not act with adequate caution. The impact on these traits is felt most when it comes to financial issues, when those with excessive optimism make risky choices and are prone to complications with saving and investing wisely.
OPTIMISM KEY TO LIVING LONGER? THIS STUDY SAYS SO
Unrealistic optimism can lead to bad financial decisions, a new study revealed. (Cyberguy.com)
“Unrealistically optimistic financial expectations can lead to excessive levels of consumption and debt, as well as insufficient savings. It can also lead to excessive business entries and subsequent failures,” Dr. Chris Dawson of the University’s School of Management, said of the results. “The chances of starting a successful business are tiny, but optimists always think they have a shot and will start businesses destined to fail.”
The study surveyed over 36,000 households for their expectations of financial well-being and compared them to the household’s actual financial outcomes, with those in the overly optimistic category having the worst results.
Coins surround a piggy bank. (Ron Antonelli/Bloomberg via Getty Images)
“The problem with our being programmed to think positively is that it can adversely affect our quality of decision-making, particularly when we have to make serious decisions,” Dawsom said. “We need to be able to over-ride that and this research shows that people with high cognitive ability manage this better than those with low cognitive ability.”
Meanwhile, those with higher cognitive ability showed traits that balanced optimism with realism in their decision-making processes, the report noted.
A furniture store posts a “Going Out of Business” sign in a residential strip mall. (Photo credit should read PAUL J. RICHARDS/AFP via Getty Images)
“This suggests that the negative consequences of an excessively optimistic mindset may, in part, be a side product of the true driver, low cognitive ability,” the study reads.
Because of this, Dawson argued that “positive thinking” and other optimistic traits that are widespread and typically viewed positively should be more thoroughly rethought.
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“Unrealistic optimism is one of the most pervasive human traits and research has shown people consistently underestimate the negative and accentuate the positive,” Dawson said. “The concept of ‘positive thinking’ is almost unquestioningly embedded in our culture — and it would be healthy to revisit that belief.”
