Want to feel better about the world in 2017? Be a rational optimist
Few measures make the point about optimism better than equity markets
Is the glass half full or half empty? It is a question that has occupied philosophical minds for thousands of years. Cases have been made for both an optimistic and pessimistic disposition in life, and we explore some of them here – before we come down on the side of what we shall call rational optimism. Taking the glass-half-empty side for a moment, there is a great deal of research that shows how humans can be prone to overoptimism. Surveys regularly find that most people consider themselves of above-average intelligence or to be better than the average driver – which by definition cannot be correct overall. Curbing one’s optimism may be the wiser strategy in many instances. Using the driving example, a lower estimation of one’s driving ability would make one more cautious on the road, leading to fewer accidents. Similarly, day traders could find their portfolios less susceptible to heavy losses from excessive risk taking. Research by the American Psychological Association in 2013...
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