Is Optimism All It’s Cracked Up to Be?

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Americans are a profoundly optimistic people. While it’s part of the national mythology that it makes us resilient, it comes with a price. As Susan Webber noted in “The Dark Side of Optimism“:

Overly positive thinking is difficult to reconcile with the need to make realistic, objective assessments. Finding the right balance between healthy optimism and delusion is harder than one might imagine, for both individuals and institutions.

And despite years—decades—of sobering examples, we don’t seem to be any closer to that balance. The recent recklessness
of residential and commercial real-estate lending was in plain view, and a vocal minority wrote about it. But the financial and business communities dismissed all the warnings, insisting that any damage—should it ever arrive—would be contained to the subprime sector. The folly was obvious: Even if decision-makers had deemed the grim forecasts to be of low probability, the potential outcomes were so dire that they demanded contingency plans…

We acknowledge these problems and their seriousness—and then put them out of mind. Instead of treating worrisome developments as new information and looking dispassionately at the risks, we tend to avoid working through downside scenarios because they are upsetting. It’s simply easier to put on blinkers and believe everything will work out than to confront the complexities of modern life.

“Negativity,” an awkward coinage, has widely come to be used pejoratively. Magical thinking, too, has become increasingly
popular as a way to gain the illusion of control in an uncertain world. Rhonda Byrne’s motivational best-seller The Secret, for example, basically says that you get what you wish for. If you don’t have the things you want, it means you don’t have enough faith. In this construct, neither insufficient effort nor bad luck plays a role…..

The end result is a bias against critical thinking. It’s hard enough, in the delicate social web of most organizations, to question the merits of any given proposal offered in good faith. But now decision-makers stagger under the weight of larger social trends and management fads that favor belief and force of personality over dispassionate analysis. Detached, rigorous thinking simply doesn’t fit any of our cultural models.

The piece discusses the well documented conflict between optimism and ability to make realistic assessments (particularly of one’s abilities) and other cognitive biases.

That article ran in early 2008. It’s becoming more popular to question optimism as its costs mount. A different angle is a defense of stoicism in “For a happier life, shake off your misplaced optimism,” by Alain de Botton.

It’s too bad that stoicism has fallen by the wayside, since it (like Buddhism) acknowledges the difficulty of the human condition and has its own strategy for cultivating inner calm. In contrast to our modern hedonistic orientation of focusing on happiness (elusive at best) and hoping we are lucky. Stoics stress reason over emotion, and the pursuit of virtue as the source of well being.

From the Financial Times:

It has been clear for a while, at least since the first talk started about “green shoots” of recovery, that what we have to fear above all is hope…

It is time to recognise how odd and counter-productive is the optimism on which we have grown up. For the last 200 years, despite occasional shocks, the western world has been dominated by a belief in progress, based on its extraordinary scientific and entrepreneurial achievements. On a broader perspective, this optimism is a grave anomaly. Humans have spent most of recorded history drawing a curious comfort from expecting the worst. In the west, lessons in pessimism have derived from two sources: Roman Stoic philosophy and Christianity. It may be time to revisit some of these teachings, not to add to our misery but precisely so as to alleviate our sorrow.

To focus on the first of these sources, the philosopher Seneca should be the author of the hour. Living in a time of financial and political upheaval (Nero was on the Imperial throne), Seneca interpreted philosophy as a discipline to keep us calm against a backdrop of continuous danger. His consolation was of the stiffest, darkest sort: “You say: ‘I did not think it would happen.’ Do you think there is anything that will not happen, when you know that it is possible to happen, when you see that it has already happened … ?” Seneca tried to calm the sense of injustice in his readers by reminding them – in AD62 – that natural and man-made disasters will always be a feature of our lives, however sophisticated and safe we think we have become.

If we do not dwell on the risk of sudden calamity, in the money markets or elsewhere, and pay a price for our innocence, it is because reality comprises two cruelly confusing characteristics: on the one hand, continuity and reliability lasting decades; on the other, unheralded cataclysms. We find ourselves divided between a plausible invitation to assume that tomorrow will be much like today and the possibility that we will meet with an appalling event,….

Because we are hurt most by what we do not expect, and because we must expect everything (“There is nothing which Fortune does not dare”), we must, argued Seneca, hold the possibility of the most obscene events in mind at all times. No one should make an investment, undertake to run a company, sit on a board or leave money in a bank without an awareness, which Seneca would have wished to be neither gruesome nor unnecessarily dramatic, of the darkest possibilities.

Given our financial prowess, we have for too long thought of ourselves as in control of our destiny. We have trusted in the mathematical geniuses who promised us “risk management” and fashioned derivatives so complex we dared not look inside. Such trust could not be further from a Stoic mindset. We must, stressed Seneca, expand our sense of what may go wrong in our lives: “Nothing ought to be unexpected by us. Our minds should be sent forward in advance to meet all the problems, and we should consider, not what is wont to happen, but what can happen. What is man? A vessel that the slightest shaking, the slightest toss will break. A body weak and fragile.”

Christianity only backed up the Stoic message. It pointed out that while humans might strive for perfection, it is a problem – indeed a sin – to suppose that such perfection can ever occur on earth. Nothing human can ever be free of blemishes. There cannot be an end to boom and bust, mayhem and death.

We have tended to cast such gloomy messages aside. The modern bourgeois philosophy pins its hopes firmly on two great presumed ingredients of happiness, love and work. But there is vast unthinking cruelty discreetly coiled within this magnanimous assurance that everyone will discover satisfaction here. It is not that these two entities are invariably incapable of delivering fulfilment, only that they almost never do so for too long.

When an exception is misrepresented as a rule, our individual misfortunes, instead of seeming to us quasi-inevitable aspects of life, weigh down on us like particular curses. In denying the natural place reserved for longing and disaster in the human lot, the bourgeois ideology denies us the possibility of collective consolation for our fractious marriages, unexploited ambitions and exploded portfolios, and condemns us instead to solitary feelings of shame and persecution for having stubbornly failed to make more of ourselves.

We should, of course, instead remember the great pessimistic voices of history. There are two quotes I cherish for these sorts of times. One is from Seneca: “What need is there to weep over parts of life? The whole of it calls for tears.” The other is from the French moralist Chamfort: “A man should swallow a toad every morning to be sure of not meeting with anything more revolting in the day ahead.”

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  1. ndk

    Pity that both articles fail to honor any of the earlier Greek stoics(e.g. Zeno, of paradoxical fame), some of whom wrote some seriously wacky and interesting things.

    They also don’t mention my favorite stoic, Marcus Aurelius. The man wielded with some singularity the greatest power of his era, but was in no way awed nor inhibited by the awkward combination of his station and philosophy. He did his part in the human drama, of which massacre and persecution are forever a component.

    I recently noted to a colleague that a VP of a major publishing company waxed philosophical about his corporation’s future set against the brave new future of intellectual property, which Buiter could have done much better attacking. He responded that, when a veep talks about the profound things in life after being asked about business, you can be certain the enterprise is screwed. Yup.

    So, too, may be realistic assessments of the economic situation, and trades initiated on that basis. The Bush administration pointed out the ability of our executive branch — no less powerful than the Roman emperors, really — to define its own reality. That was true then, is probably true now, but won’t always be true in the future.

    Until then, stoics of Aurelius’ cast will have to content themselves with being wrong. And, when philosophy is invoked, as it is here, you know being wrong hurts.

  2. attempter

    As this philosophical and religious history shows, there is nothing humanly inherent about the modern bourgeois brand of vapid, aggressive “optimism”, which is really related to the license and unwarranted sense of entitlement which has been instilled by fossil fuel capitalism and mass democracy.

    Specifically, indoctrination in this don’t-worry-be-happy is part of the ideological agenda which seeks to concentrate wealth and power and destroy all safety nets even as it deflects blame and fear over this away from itself.

    Thus anyone who fears for his job or his health is placed in the position of a soldier suffering from shell shock: he’s just a whiner; he should suck it up; he should be afraid to talk to others about his fears and suspicions; he certainly shouldn’t even think, let alone say, that perhaps his misfortune is anything other than the result of his own weakness.

    To not be idiotically optimistic about the “genius of the market” and the good faith of the powers that be is tantamount to a dissent from the entire modern ideology.

    Since such a fundamental mindset shift is a prerequisite for the rise of true, systematic dissent, therefore those who want to quash dissent seek to strangle the “pessimist” mindset in the cradle.

  3. Thomas

    Very valid post, IMHO.

    Quote: “from the French moralist Chamfort: A man should swallow a toad every morning to be sure of not meeting with anything more revolting in the day ahead.”

    Hmmmm. I wonder if the guy went ahead and took his own advice…?

  4. Big Picture Trader

    as long as we’re talking about Seneca, try this quote on for size :-)

    “He who spares the wicked injures the good.” seems a bit appropriate in our current economic situation, doesn’t it?

  5. Richard Kline

    Where I come from, ‘magical thinking’ was a serious pejorative, with involuntary medication just around the corner!

    Optimism has great value if it occurs in a structured context. But I think the emphasis on optimism vs. ‘reason’ is a bit misapplied to our present crisis. It is well understood that when behavior—anyone’s—becomes unchecked by actual consequences, internal inhibitions prove thin, partial, and malleable when they aren’t altogether absent. The problem wasn’t ‘optimism,’ it was the removal of negative consequences for the most powerful actors in the financial system. No regulation, or completely tamed pseudo-governance. On-selling of junk so that the ‘problem’ went elsewhere. No substantive legal check constraint on CDS swaps. Then there are those home owners on 0% equity or who re-fi and cash out all their appreciation who were betting that prices would continue skyward—but it looked a good bet because the powers that be rigged the game at the top and prices _did_ continue to sky for an unbelievable, unconscionable, manufactured duration.

    Farmers planting each Spring (or when they must) are guilty of optimism. Circumstances can, and do, conspire to take their crop, their money, and if long enough continuing their way of life. But banksters spinning bad paper with other people’s money aren’t guilty of optimism: they are children without intact superegos and no external constraints. That way lies the madness of the Lord of the Flies.

  6. alphabetzoo

    Plus, as Oliver James said in his book ‘Affluenza’, overly positive thinking is not associated with better mental health.

  7. frances snoot

    Perhaps the ‘optimism’ is a hope that the old system of fractional reserve banking and leveraged banker bets will continue endless. Isn’t this the agenda of the Obama administration: to somehow salvage a house of cards that has blown apart?

    If we put optimism in that which has worth we will not be disappointed by reality.

    Magical thinking can be a conduit to reason…imagination is science. Both are enablers.

  8. Dan Duncan

    Yesterday we had the dangers of The Swine Flu…and today…it’s the dangers optimism!

    Oooohhh scary!

    You’ve mistaken nihilism for reason.

    This blog goes out of its way to emphasize the negative…in a manner that’s just as emotional and unreasonable as Magical Thinking.

    The last few days with all the posts about Swine Flu…pandemics and my favorite: CLICK HERE TO VIEW A BIOSURVEILLANCE INTERACTIVE FLU MAP.

    How about the Letter of Credit scare? A couple of months ago Naked Cap was breathlessly writing about how we are essentially not going to be receiving any shipments of goods as banks are refusing to accept Letters of Credit. Even though there were some real issues on this matter, the tone of those posts was apocalyptic. And not once has there been a caveat-free follow-up acknowledging that things weren’t nearly as bad as originally feared.

    And I’m not even getting into the palpable glee spilled in the Comments Section when economic fears are at their greatest.

    I love it: The NakedCap Community opining about the dangers of optimism.

    I can’t quite pin down the spirit here….

    I’m sure the Germans do have a word for it, so here’s what I’m looking for:

    A word that combines shodenfreud, nihilism and self-congratulation…

    …so that the pleasure of “mankind’s comeuppance” is enhanced by the smug satisfaction that you were enlightened enough to realize that it is deserved.

  9. frances snoot

    Mr. Dan:

    Science had its source in alchemy. If one researches the ‘thinking’ of Newton, a font is discovered which is not soldered on materialism. It is not ‘unreasonable’ to foster magical thinking. It is also not ‘nihilistic’ to dialogue about the economic collapse ongoing in the global community.

  10. DiverCity

    Mr. Kline said: “But banksters spinning bad paper with other people’s money aren’t guilty of optimism: they are children without intact superegos and no external constraints. That way lies the madness of the Lord of the Flies.”

    That’s one of the best and most appropriate descriptions of the banksters’ machinations that I’ve seen.

  11. DownSouth

    Webber and de Botton make some insightful observations, but their analysis doesn’t go far enough. For they fail to take the final step, which is to realize that this unbridled optimism was clearly the ideology of a rising bourgeois class, and served and continues to serve the interests of that class. It embodies the individualistic prejudices and illusions of that class, by underestimating the cataclysms that can befall an indiviual. Instead modern bourgeois thought offers the panacea that, through rational behavior, an individual cannot only predict these cataclysms, but control them.

    It seems the farther one is from staring into an abyss, the easier it is to buy into bourgeois optimism. Sitting in the U.S., a thousand miles from Mexico City and with an advanced medical infrastructure, it’s easy to be smug about the flu outbreak. But if one is like myself, living here a couple of hours from Mexico City, it’s not so easy to be optimistic.

    The same is true for economic phenomena. If one is Henry Paulson, or even someone like Warm, Dry and Well Fed who frequently posts here, they are far enough from staring into the economic abyss that they can be quite smug. But if you’re a 70-year-old ex-Chrysler assembly line worker who doesn’t know whether his next pension payment will arrive or not, it’s not so easy to be optimistic.

    Why does this matter?

    Reinhold Neibuhr explains:

    The classes which prefer liberty to security (bourgeois libertarians) are those which already have a high measure of security…and do not like to have their economic power subjected to political power. The classes which prefer security to liberty, on the other hand, are on the whole devoid of…individual securities, they are exposed to the perils of a highly integrated technical society, and therefore fear insecurity more than they fear loss of liberty.~

    In order for the bourgeois to maintain its privileges in the society, to not be overwhelmed by the security-seekers, it therefore must maintain the sense of optimism, whether it be myth or truth.

    The problem that orthodox economics faces is that it has entered this fray on the side of the bourgeois, stating the preferences of the bourgeois, Neibuhr said, “as if they were scientifically validated.”

    Other American thinkers who have deconstructed orthodox economics are Robert L. Heilbroner in Behind the Veil of Economics, Amitai Etzioni in The Moral Dimension: Towrds a New Economics, John Gray in Al Qaeda and What It Means to Be Modern and of course Thorstein Veblen.

    Heilbroner believed that “capitalism is moving through a period of difficult adjustment” which he hoped would lead us to a “more historical and self-scrutinizing set of conceptual building blocks.” However, he acknowledged that “dogma and increasingly rigid orthodoxy” are responses to challenges as much as “reflection and adaptation.”

    From my vantage point, it is rather clear that the ruling classes in the United States have chosen to respond with “dogma and increasingly rigid orthodoxy.” This sets the stage for a civil war whose outcome, though unpredictable, could prove to be catastrophic.

  12. Anonymous Jones

    Nihilism. As Inigo Montoya said to Vizzini, “You keep using that word. I do not think it means what you think it means.”

    (not to mention the pot and kettle implications of attacking this blog for being negative (and sometimes wrong…ooohh, the horror…with an average of five posts a day every day, you can find one issue that was overblown, kudos!) with the most negative and spiteful comment in the queue).

  13. Blissex

    «How about the Letter of Credit scare? A couple of months ago Naked Cap was breathlessly writing about how we are essentially not going to be receiving any shipments of goods as banks are refusing to accept Letters of Credit. Even though there were some real issues on this matter, the tone of those posts was apocalyptic. And not once has there been a caveat-free follow-up acknowledging that things weren’t nearly as bad as originally feared.»

    Things were incredibly bad, and are still pretty bad on that front.

    Surely a large part of the collapse in international trade has been due to collapsing demand, but also to unavailability of trade credit. There have been proposals to rex-expand the exports credit agencies that existed for decades to remedy that.

  14. DownSouth

    Dan Duncan,

    I agree that an excess of pessimism is just as dangerous and even more pernicious than an excess of optimism, and that ideology tends to obscure the shades and shadows of life where the proper balance between optimism and pessimism is found. But don’t you think your critisim is a little off target?

    An abundance of pessimism leads to defeatism or nihilism. Both hold that the world–society–is beyond salvation. So, according to nihilism, this is as it should be or, accoding to defeatism, this is not as it should be but nothing can be done about it, so why try? Do you really believe those descriptions fit Yves, or a majority of those who comment on this blog?

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