Kahneman thinks that many of us suffer from (or are blessed with, depending on how you see things) "optimistic overconfidence." He writes that "the optimistic bias may well be the most significant of the cognitive biases. Because optimistic bias can be both a blessing and a risk, you should be both happy and wary if you are temperamentally optimistic." (Thinking, Fast and Slow, p. 255).
Generally speaking, the optimistic bias is a good thing. Life is much more pleasant for an optimist than for a pessimist.
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....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....(Kahneman, Thinking, Fast and Slow, 255-256).That may be true for mature adults, but we should not forget that many teenagers are optimists and many of them haven't fully developed frontal lobes, which impairs their ability to make good judgments. The optimism of young people often drives them to engage in risky, dangerous behaviors, especially regarding sex, alcohol, and other drugs.
Even for adults, however, there are times when too much optimism can be delusional. Optimistic bias can lead to unrealistic evaluation of prospects and overconfidence in taking risks. Kahneman notes that even though only 35% of small businesses survive for five years in the U.S., entrepreneurs rate the chances of success of any business at 60% and the chances of success for their own enterprise at 81%! One-third of entrepreneurs think their chance of failing is zero. While it is certainly important for someone in business to be confident, it is also important to be realistic.
The optimistic bias commonly gives rise to the illusion of skill. On the other hand, without optimism not too many projects would get off the ground nor would many risks be taken. Still, after one has set one's goals and objectives, collected and studied carefully a set of relevant cases similar to one's own, and developed a plan of action, one should try to debias excessive optimism. How? One way is to force yourself to consider what might go wrong. At least, this was one conclusion of a study by Sara Lichtenstein, Baruch Fischhoff, and Lawrence D. Phillips ("Calibration of probabilities: The state of the art in 1980," in Judgment under uncertainty: Heuristics and biases, eds. Daniel Kahneman, Paul Slovic, and Amos Tversky. Part VI of this book is devoted to the topic of overconfidence.) It may not come naturally, but considering what might cause you to fail just might save you from plowing ahead in the Big Muddy as you and your acolytes sink into the quicksand.
Some people make unrealistic risk assessments because they are ignorant: they lack the necessary knowledge to make a realistic judgment. Such people often engage in risky sexual behaviors and develop unhealthy habits. These folks are optimistic about their chances, say, of not getting AIDS from unprotected sex or not getting cancer from smoking. It is possible that their optimism is due to wilful ignorance rather than to an unrealistically benign view of the world around them, though willful ignorance and an overly benign view of the world are not mutually exclusive.
Many teenage drivers have an unrealistic view of the risks involved in drinking alcohol (or using other drugs) and driving. Many Driver Education classes have used DUI Shock Films to scare young drivers. These films are known for their gory realism of DUI car crashes that kill and mutilate people. Is there strong evidence that such films have a significant effect on the optimistic bias of teen drivers that leads to thousands of deaths in DUI car crashes each year? I couldn't find any, and I'm not that optimistic about the evidence being out there.