The Role of Optimism in Decision-Making

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Decision-making and Valuation > Best Practices > The Role of Optimism in Decision-Making

The Role of Optimism in Decision-Making
Herman vd Berg
How does optimism influence decision-making?

Optimism in Making Decisions
Jaap de Jonge, Editor, Netherlands
Interesting question Herman... I believe there are many ways:
- One is related to organizational pressure (only the best proposals make it, so we present our projects overoptimistic).
- Another thing is we know that quite often in (organizational) cultures optimists are being regarded and rewarded higher than pessimists (tough-guy macho culture).
- Thirdly, our brain may be fooling us. For example the bandwagon effect and being overconfident about our ability to control outcomes.
I suspect there many more ways? Who joins in the discussion?

Optimism and Decision Making
Joe Boyle, United States, Member
Herman - it does have an effect - and can skew results - people will see what they want to see. Also, how you see your future will affect the future.
Can you let objective data drive the decision-making process? It's not easy.

How Does Optimism Influences Decision Making
Lilyana Dewie
To make a good decision, we really need optimism, focus and energy. With optimism we can gather facts and data, even when it's quite difficult. Then look for the causes, and finally present alternative solutions.

Optimism <= Perceptions of Challenge and Ability A/C=O
Daniel Latch, Management Consultant, United States, Member
In response to Ms. Dewie, I wonder how you feel about this:
"To make a decision good, we really need optimism, focus, and energy". and:
"To make a good decision, we really need to understand the challenge or intended outcome and what it takes to achieve it".
Optimism may be described as the emotional or energy component of the relative distance and direction of energy flow between one's perceived ability to effect an outcome and one's perception of the challenge involved in doing so.
This is a central precept of the change grid which is used for decision making, strategic planning, problem solving, and a host of uses. See it at targetingchangeworks dot com.

Optimism Influence on Decision-making
Jean-Francois Landre
Optimism can negatively influence decision-making through biases in judgmental heuristics such as memory retrievability, presumptions, delusions or misconception of probability rules. In such circumstances, the decision-maker (DM) might be convinced that his decision-making process (DMP) is flawless while in fact, it is not.
Optimism can positively influence a well balanced DMP, whereas the DM will make decision under uncertainty, with a thoroughly measured risk perspective and a solid knowledge of his intangible assets, such as staff capabilities and competence.
So, what does optimism has that pessimism has not?
Pessimism triggers higher levels of stress which in turn generates clinically identified neurophysiological effects: decreased memory, decreased cognitive capabilities and decreased physiological stamina.
So, even as optimism does not prevent decision-making biases, it does not bring a wide array of intrinsic physiological deregulations that decreases intellectual capabilities.

It Depends on the Basis of Optimism
PRASAD SN, Professor, India, Member
Decision making based purely on optimism may lead to disaster.
Optimism as a result of confidence in your own abilities, training and knowledge of similar, earlier situations may lead to successful decision making. Further, when you have the ability to foresee the reactions of the other people involved in achieving success which is a result of that decision making, optimism is justified and will lead to success.
We can safely say that "you should plan like a pessimist, hope like an optimist and make your decisions like a pragmatist".

Optimism and Decision Making
Marcel Wiedenbrugge, Consultant, Netherlands, Member
Instead of optimism I would prefer to use the word realism. At the end of the day, in business optimism is important, but it must always be linked to money. For example: in sales you may be optimistic to score a deal, but what sense does it make if you find out afterwards that your new customer is not able to pay you? In other words, if you had checked your customer on creditworthiness in the first place, you may had made the decision to stop wasting time and search for better opportunities.

A Predetermined Optimistic Emotional Attitude
Henry Lozada, Professor, Puerto Rico, Member
A predetermined optimistic attitude (emotional) makes the decisions more easy and fast to make. However, you can lose perspective or the reality of the environment and not see or be aware of overlapping possible consequences, either positive or negative (adverse). My recommendation is that when a manager has certain feelings or situations predetermined (emotional), he should consult with his contemporary peers or professionals. He will then be in a better position to make wise decisions or take calculated risks.

The Need for Optimism Depends on the Decision-making Discipline
ahmed mahmoud ahmed abdo, ex-lecturer at the faculty of commerce Banha University, Egypt, Member
It depends on the kind of decision.
Data, knowledge, experience, pre-studies, etc. are very critical in deciding within the areas of medicine, military, engineering, etc. Because any mistake means death. So these are fields that refuse people being an optimist.
Yet there are other areas in which it helps to be an optimist.
In the field of business commerce it helps, because loss of money is more acceptable than loss of souls.

Optimism is Important but not Enough
ABOBAKER M, Accountant, Malaysia, Member
Although optimism is important, decision makers can not rely on it alone. Optimism will encourage them to take a decision but is not enough to make good and successful decisions.
We also need information derived from various systems such as cost accounting system besides optimism in decision making.

Pessimism Can Also be Helpful in Decision-making
For me optimism is linked to a person; optimism is a skill. It is not linked to a subject or decision. Even though you need positive energy and drive that could come from optimism. For good decision making you should look broader and overlook all the possible alternatives. First decide what the 5 main issues are concerning the subject, then make future scenario, based on worst case and most optimistic presumptions. For the worst case scenario pessimism can also be a great help! Then include the highest feasible outcome trying to include the outcome of both angles.

Optimism Yes But Over-confidence No!!
Fariborz, Manager, Iran, Member
Decision making is an important task that influences many things in the future. Generally speaking, a decision maker should be optimistic, what is the point for making a blurred & vague decision!?
Optimism is in fact the fruit of knowledge, experience, proper management as well as other positive factors such as fairness and courage, in other words optimism would help and support decision making.
On the other hand we should not close our eyes towards negative aspects of being too positive which is in fact being over-confident. This negative quality could bring wrong ideas, incorrect perceptions and of-course at the end of the day unfavourable results for the decision maker.

Optimism and Common Sense
Salvatore DeCarlo, United States, Member
Optimism has to be based in reality. If we are optimistic while acknowledging the reality of the desired outcome, we will be able to recognize available resources and more effectively use them in achieving our goal.
Unfortunately, people such as the victims who were taken in by the recent securities mega-scams were optimistic. They expected extraordinary returns on their investments. Also unfortunately, they were not realistic and many lost their investments, some of which were significant. Optimism has to be tempered at both ends of the spectrum so opportunities are not missed and resources are not squandered.

Optimism vs Wishful Thinking
Rebecca Roe, United States, Premium Member
I think optimism and wishful thinking should be explored here. Good managers will be chosen on the basis of being able to transform pessimism in the workplace with a balanced approach of focusing on what can be done (realism) and an eye for the future goals. Pessimism and cynicism abounds based on past project experience. Managers pick project leaders who have a clear vision of what needs to be accomplished and who to select that can be positive, optimistic and goal focused. No one will bring a project to success if the round table discussions are negative and pessimistic. Its doomed from the start. Managers must have a way to combine optimism, leader selection and a good dose of salesmanship to make any project work.

Optimism Gives a lot of Energy
Thupalli Ravindra Reddy, Manager, India, Member
Having optimism gives a lot of energy. By being optimistic, many negativity factors will vanish. Once employees accept the organisational needs positively they work with their full heart while implementing the strategies.

Optimism Makes One Lower the Guard
R.C. Natarajan, Professor of Marketing, India, Member
Optimism in the context of inter-personal relationship makes one lower the guard. My research shows that the principal's trust - a form of optimism - in his agent makes the former show a lower tendency to monitor the latter both (a) for preventing the latter's opportunism; and (b) for assisting and helping the latter to perform better. There is a subtle difference noticed: in the context of (a) shown above, the tendency was less than in the context of (b).

Avoiding Optimism in Decision Making by Top Guys
Tony Gosling, United Kingdom, Member
I work on major defence procurement and support decisions and getting these wrong can destroy your company or lose $billions of taxpayers money. I think there is an optimism bias in many decision making processes. For some decisions in some sectors this is fine. There is a long history of deliberate optimism bias to get programmes going that wouldn't start if people knew the true cost.
Realistic decision making in these situations is important but often the incentives for the guys at the top are to be optimisting then move on before the problems occur.
If decision makers want decent numbers, without optimism bias, the solution is to build uncertainty into the decision making numbers, use a wide range of estimate sources, refuse to believe that "this time we will do it better" and get independent scrutiny of the numbers.

Optimism in Decision-making is Like Two Sides of a Sword
Zeb O. WATURUOCHA, Management Consultant, India, Member
Optimism in decision making is like two sides of a sword where each side is sharp.
Optimism in decision is full of assurance, which however may not be real.

Optimism in Decision Making is a Matter of Mindset
Jeff Wilson, Manager, United States, Member
Think of it this way - what is your mindset?
A. Life is a test, therefore avoid looking foolish which breeds a fear of uncertainty, and avoidance of new experiences and a narrowing of your repertoire. Or
B. Life is a journey of learning, therefore embrace uncertainty and seek out new experiences. You will then broaden your repertoire.
One is a fixed mindset where the later is a growth mindset. It is clear what decisions each will make.

Optimism Avoids Stagnation
Hassaan Khalid
A pessimist will not take risks because he won't expect a return on them. So optimism is required, obviously along with proper facts and figures - we aren't talking blind faith here.. But optimism is what allows managers and high ranking people in organizations to bring changes for the better.
You need optimism to bring change. Otherwise the organization will stagnate.
For example all ERP implementations require optimism because it is a risk. It involves sometimes even changing your organizations culture. Impossible without optimism.

Optimism Useful for Making Decisions
vincenzo de vera, Manager, Italy, Member
Optimism normally leads to positivity, a very useful attitude for managing people and difficult situations and consequently also for making decisions.

The Role of Being Positive in Decision-Making
vincenzo de vera, Manager, Italy, Member
It is the basic state of mind which leads to success. Maybe better call it "Positiveness" which does not mean that one should not be conscious of difficulties and threats, but, if possible, to "see" the opportunities behind them.
I believe optimism may not be "sufficient" alone, but it certainly is a "necessary" ingredient for a successful business.

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