Optimism bias is the demonstrated systematic tendency for people to be over-optimistic about the outcome of planned actions. People tend to see the future through “rose-colored glasses,” as the saying goes. Optimism bias applies to professionals and laypeople alike. Optimism bias arises in relation to estimates of costs and benefits and duration of tasks. It must be accounted for explicitly in appraisals, if these are to be realistic. Optimism bias typically results in cost overruns, benefit shortfalls, and delays, when plans are implemented.
In a study in search of the brain regions responsible for optimism, researchers noted that “humans expect positive events in the future even when there is no evidence to support such expectations. For example, people expect to live longer and be healthier than average, they underestimate their likelihood of getting a divorce, and overestimate their prospects for success on the job market.”
In a debate in Harvard Business Review, between Daniel Kahneman, Dan Lovallo, and Bent Flyvbjerg, Flyvbjerg (2003) – while acknowledging the existence of optimism bias – pointed out that what appears to be optimism bias may on closer examination be strategic misrepresentation. Planners may deliberately underestimate costs and overestimate benefits in order to get their projects approved, especially when projects are large and when organizational and political pressures are high. Kahneman and Lovallo (2003) maintained that optimism bias is the main problem.