If you imagine yourself wealthy, you will become wealthy.
Skeptics from the London School of Economics and Political Science and the University of Bath followed people’s finances and expectations for 18 years and found that overly optimistic thinkers end up not rich, but sadder and poorer. Perhaps optimism is not a self-fulfilling prophecy.
Who fares best? Realistic thinkers, who make decisions based on accurate assessments—aka reality. “Being realistic about your future and making sound decisions based on evidence can bring a sense of well-being, without having to immerse yourself in relentless positivity,” noted the study’s coauthor Chris Dawson, an associate professor of business economics at the University of Bath School of Management.
The study tracked 1,600 individuals in the British Household Panel Survey for nearly two decades.
Both unrealistic optimists and unrealistic pessimists faired poorly due to making decisions based on biased expectations. Both tactics also result in emotional turmoil: Overly optimistic thinkers can experience destructive levels of disappointment when expectations do not pan out, while overly pessimistic thinkers can experience the ongoing dread of seeing and expecting problems.
To help illustrate how optimistic, realistic, and pessimistic thinkers function, coauthor David de Meza, a professor of management at the London School of Economics, describes how each behave during a pandemic. “Optimists will see themselves as less susceptible to the risk of Covid-19 than others and are therefore less likely to take appropriate precautionary measures,” he writes. “Pessimists, on the other hand, may be tempted to never leave their houses or send their children to school again. Realists take measured risks based on our scientific understanding of the disease.”
Realistic thinkers, of course, are a minority: The researchers say that roughly 80% of the population are unrealistic optimists, who tend to overestimate the likelihood that good things will happen and underestimate the possibility of bad things. The title of Karen Cerulo’s excellent book on the topic describes the downside of this all-American outlook: Never Saw It Coming.