Successful inventors, entrepreneurs and leaders tend to be more optimistic than average.
March 11th, 2019, is an important anniversary for Warren Buffett. It was 77 years ago that Buffett bought his first stock. He was only 11-years-old and spent his entire life’s savings of $114.75.
In a fascinating and insightful section in this year’s letter to Berkshire Hathaway shareholders, Buffett looks at the history of America in three 77-year periods.
In the two periods before 1942, America had grown from a nascent democracy to the most powerful country on Earth. And it happened despite the Civil War and the Great Depression. In the last period–the 77 years since Buffett bought his first stock– the country has seen wars, civil unrest, financial catastrophes, and 14 presidents (seven Democrats and seven Republicans).
Through all of this, Buffett has looked at the world through a positive lens, and it’s the fundamental mental trait that has fueled his success in the past 77 years. He says if you look at the facts as they are–and how far we’ve come–the opportunities ahead of us are “mind-blowing.”
How can Buffett be so optimistic when there’s so much to be worried about? Psychologists have an answer.
Mental Biases That Block Optimism
In 2001, the influential psychologist Roy F. Baumeister published a seminal paper titled “Bad is Stronger Than Good.” Negative information, scary headlines and bad news has a far deeper impact on us than positive news, he concluded. We respond to threats. We overlook the positive.
Pair this with the ‘availability heuristic,’ the cognitive bias identified by Daniel Kahneman and Amos Tversy where we give more weight to events that we see or hear most often, and you’ve got a prescription for the kind of pessmistic thinking that will hold back your success.
For example, in December of 2018 the stock market took a hit. News and blogs were full of fear and dread as the market lost ground day after day. As a result, small investors rushed for the exit. They pulled so much money out of the market that December one of the worst months for actively managed mutual funds on record.
In my recent keynote speeches I show a slide of the very first business-related article I read at the start of this year. It was from the New York Times and contained more than a dozen threatening words such as: alarm, fret, concern, fears, trouble, etc. But then something extraordinary happened. The very next day the stock market soared 747 points and continued to rise for the next eight weeks.
If you had acted on the bad news you would have missed the best two-month start for the stock market in the last thirty years.
Since the human brain is hard-wired to see threats, we share bad news more readily than we celebrate good news. But if you act on that news, you’re likely to miss the opportunities that optimists are finding each and every day.
Stay Positive to Stand Out
I’m often invited to meet with executives at the tech giant, Intel. When I enter the lobby, I’m always inspired by a quote that greets visitors. It’s by Intel co-founder and Silicon Valley pioneer, Robert Noyce. It reads: “Optimism is an essential ingredient of innovation.”
Without optimism, Noyce argued, the individual would choose security over risk, status quo over change and safety over adventure. I’ve often wondered why the inspiring leaders I meet and write about are much more optimistic than average. Now I know why. Pessimists, critics, and naysayers don’t move the world forward. They fit in, but they don’t stand out.
In his book Thinking, Fast and Slow, Nobel Prize-winning economist and psychologist, Daniel Kahneman, says that optimists are not average. They are the inventors, entrepreneurs, and leaders. Optimists “play a disproportionate role in shaping our lives,” he writes.
Kahneman’s research shows that optimists are happier and more cheerful than the average person, therefore more popular. They are more resilient when facing a setback and adapt better to change. It’s the stuff that built Silicon Valley. Without optimists, we wouldn’t have the products and companies that have changed our lives for the better.
It’s hard to be positive when we’re surrounded by doom-and-gloom everywhere we turn, but it helps to look at history in 77-year periods like Buffett has done. For the record, Buffett expects the “tailwind” that has unleashed progress to push us foward for the next 77 years ago. Given Buffett’s track record I wouldn’t bet against him.