A few weeks ago, I posted a blog entitled “Mediation is a Mindset” suggesting that if one walks into a mediation with a positive attitude, the mediation will probably be successful.

Unwittingly, I was discussing “optimism bias” which, as defined in Wikipedia:

“. . .is the demonstrated systematic tendency for people to be overly optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events. Along with the illusion of control and illusory superiority, it is one of the positive illusions to which people are generally susceptible. Excessive optimism can result in cost overruns, benefit shortfalls, and delays when plans are implemented or expensive projects are built….”

Optimism bias involves a “belief that the future will be much better than the past and present….” (The Optimism Bias by Tali Sharot, Time, May 28, 2011). It may well be hardwired into our brain. (Id.) It is likely to occur for events which we can control and for which we have stereotypes of the typical person who may experience the event. That is, in comparison to the average Joe, are you better or worse off? (Optimistic Bias by William M.P. Klein, University of Pittsburgh at p. 2)

This bias will be found in each of us – no matter our gender, age, education or nationality. (Ariely, Dan, The Curious Paradox of ‘Optimism Bias “, Bloomberg BusinessWeek, August 13, 2009.) Interestingly, this bias correlates to depression. “Depressed people. . . have a more accurate take on reality.” Their perceptions are more in line with reality. (Id.)

Having an optimism bias is both a blessing and a curse. It is a curse in that being optimistic, “risk-takers underestimate the odds they face and, because they misread the risks, optimistic entrepreneurs often believe they are prudent, even when they are not. . . .” (Bias, Blindness and How We Truly Think (Part 1), Daniel Kahneman, Bloomberg (October 24, 2011.)

It encourages persistence in the face of obstacles to the point of being costly. In a study conducted by Thomas Astebro, potential inventors were provided with objective assessments of their proposed idea by the Canadian Inventor’s Assistance Program, which in the past had been pretty accurate in its forecast of success and failure. In the study, about half of the potential inventors quit after receiving the bad news that their project would fail. The other 47% continued on, developing a hopeless project; in the end, they simply doubled their losses, never succeeding. (Id.)

Thus, optimistic people take greater risks and do so when they personally have more at stake, such as owing stock in the company that they are attempting to take public, or to merge. (Id.) If they do succeed, it is extremely beneficial. If they do not succeed, it may result in cost overruns (Wikipedia,supra.)

With this type of bias, people will tend to be egocentric in that “when comparing their risk to that of others,” they tend “to focus more on their own risk factors” than those of the others.( Klein,Optimistic Bias, supra, a p. 2.) Thus, they will have an “illusion of control” or a “better than average” belief , if not a “uniqueness bias.” “People who overestimate their ability to control an outcome may engage in more risky decisions and behaviors.” (Id. at pp. 8-9.)

This bias appears in any negotiation (including a mediation) when a party is asked to predict the future (or the outcome at trial). She will invariably be over-confident predicting a more positive event or outcome. This is where the “reality check” comes into play; to deflate the over-estimation of a positive outcome and to have the party acknowledge that one cannot always view life through rose colored glasses. While Hope is good and important, we must guard against being overly or unrealistically so.

So, while it is beneficial to attend a negotiation or a mediation with a positive mindset, at the same time, beware of your optimism bias; your eternal Hope that things will turn out better than they actually will may not be realistic. By giving yourself your own “dose of reality”, you will reach a realistic resolution.

. . .Just something to think about!

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