I started a new French class his week. Most of my classmates are regulars, but since we have a new teacher, we were all asked to introduce ourselves. And to spice things up, we were asked to talk about whether we're glass half full or half empty kind of people.

When it came to my turn, and before I could answer, one of my classmates jumped in and said "Brandon est un optimiste." And you know what, this made me happy. I took it as a great compliment.

Because to be a real estate developer, I think you need to be an optimist. I have argued this before on the blog.

This is not to say that you don't need to carefully manage risk, and think about all of the things that can and probably will go wrong. It is say that the inertia working against you is so great, that you really need to believe in the future you are trying to create. If not, you're liable to not make it.

So this morning, when my partner Lucas showed me the below quote from Nobel Prize winner Daniel Kahneman, I immediately thought, "yeah, this is going on the blog."

"If you are allowed one wish for your child, seriously consider wishing him or her optimism. Optimists are normally cheerful and happy, and therefore popular; they are resilient in adapting to failures and hardships, their chances of clinical depression are reduced, their immune system is stronger, they take better care of their health, they feel healthier than others and are in fact likely to live longer.
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Optimistic individuals play a disproportionate role in shaping our lives. Their decisions make a difference; they are the inventors, the entrepreneurs, the political and military leaders – not average people. They got to where they are by seeking challenges and taking risks. They are talented and they have been lucky, almost certainly luckier than they acknowledge… the people who have the greatest influence on the lives of others are likely to be optimistic and overconfident, and to take more risks than they realize."

This excerpt is from Kahneman's book, Thinking, Fast and Slow. I haven't read it. But now I want to.

In 1988, William Samuelson (Boston University) and Richard Zeckhauser (Harvard University) published a seminal paper called, Status Quo Bias in Decision Making.

In one of the experiments cited in the paper, two groups of people are given a hypothetical task that involves picking from a selection of different investment opportunities.

In both cases, the groups are told that they are someone who regularly reads the “financial pages”, but that up until recently hasn’t had much money to invest.

Both groups are then told that they have just inherited “a large sum of money” from their great-uncle. This is now where the groups diverge in terms of the information given.

The first group is given a neutral version. They are told they can invest in any of the following portfolios: a moderate-risk company, a high-risk company, treasury bills, or municipal bonds.

The second group is given the same selection of portfolios, but is also given a “status quo selection.” They are told that a significant portion of their great-uncle’s portfolio is currently invested in a moderate risk company. 

(They are also told that the fees associated with an investment change are insignificant and should not be a consideration for this decision.)

What do you think happened?

A number of different scenarios were tested, but as soon as one of the options was presented as the status quo, it became “significantly more popular”.

This status quo advantage also tended to increase as the number of investment options increased. Perhaps people just got overwhelmed by the options and went with the “safe bet”.

This phenomenon has become known as the status quo bias. 

It is one of the reasons why some political offices have term limits. The incumbent bias can make for an uneven playing field. People vote for the name they recognize on the ballot.

And it is one of the reasons why change, in general, can be so unsettling. The countless studies suggest we have an inherent bias towards the status quo irrespective of its objective merits.

P.S. This is what came to mind as soon as I heard people calling the King Street Transit Pilot a “disaster” before the first weekday of its run was even over.

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.