Cause of misjudgment № 13
Overoptimism Tendency
Even absent any threat, people are wired to expect things to turn out better than the odds warrant.
Munger reached back to the ancient Greek orator Demosthenes for this one: “What a man wishes, that also will he believe.” People do not merely hope for good outcomes — they expect them, and they expect them at rates the evidence does not support. This default optimism runs even when there is nothing pushing it; it is simply how the mind is tuned.
You can see it priced into human behavior everywhere. Lottery players genuinely expect to win against astronomical odds. Most new business owners believe their venture will beat the base rate of failure, even though the base rate is well known and grim. Couples marry confident they will not be the ones to divorce; smokers assume the disease will strike someone else. Each individual feels like the exception, and the aggregate optimism is wildly out of line with the statistics.
The corrective Munger prescribed is to fight wishful thinking with cold arithmetic — the elementary mathematics of probability that Pascal and Fermat worked out. When optimism is doing your forecasting, you should deliberately consult the base rates: how often do ventures like this actually succeed, how often do projects of this kind come in on time and on budget. The numbers are unglamorous and usually disappointing, which is exactly why people skip them and why disciplining yourself to look is a durable edge.
