Tali Sharot, in a interesting TED talk, delineates the benefits of optimism: in short, “without optimism, we would all be depressed.” We remain optimistic despite reality’s failure to conform to our hopeful expectations. Even if we could, we do not want to give up our optimism because it has happiness benefits: positive anticipation makes us happy; a positive interpretation of a bad outcome makes us try harder and increases the chance of a positive outcome in the future; even our health is improved by a happier frame of mind.

The problem is when we underestimate or disregard negative warning signs, for ex., in thinking that although smoking kills, it will kill the next guy and not us. In general, we tend to believe that the actual odds of divorce, cancer, budget overruns etc. do not apply to us, which means that we continually put ourselves at risk. But this predicament isn’t hopeless. Sharot proposed that we simply factor in our bias towards optimism in making decisions. Get a pre-nup, with the expectation that it will never be used. Add a 20% overage factor to a construction budget. Resist risky behavior with the understanding that your assessment of the risk is almost surely inadequate.