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Why pessimism sounds so smart

Tom Gardner and Morgan Housel (The Motley Fool) recently published a LinkedIn article called, Why Does Pessimism Sound So Smart? (Especially When Things Are So Good.)

Here is the gist of it:

If you say the world has been getting better you may get away with being called naïve and insensitive. If you say the world is going to go on getting better, you are considered embarrassingly mad. If, on the other hand, you say catastrophe is imminent, you may expect a McArthur genius award or even the Nobel Peace Prize.

Part of the reason for this is that we, as humans, respond more strongly to losses:

There’s clearly more at stake with pessimism. Daniel Kahneman won the Nobel Prize for showing that people respond more strongly to loss than gain. It’s an evolutionary shield: “Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce,” Kahneman once wrote.

The behavioural economic theory being referred to above is called Prospect Theory. I wrote about this back in the fall of 2013 and made the argument that Prospect Theory might explain why NIMBYISM is so common in city building. 

Change to our communities is perceived as risky. And in the face of these uncertain situations, we tend to place more emphasis on the potential losses (traffic, congestion, shadowing, and so on) rather than the potential gains (increased vibrancy, improved streetscape, creation of more housing, and so on). It’s human nature.

Having said all this, I show up here every day and try to make this blog a positive place on the internet. Sure, I make suggestions about things I think we should do, but I generally focus on them as opportunities. Hopefully that comes through, because I’m a big fan of optimism.

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