Glass half empty

Every day, we wake up to negative reminders. Wars, earthquakes, recessions, bank collapses — dreadful events that intensify our uncertainty about what tomorrow will bring.

When we listen to dramatic news reports, reality might seem worse than it really is. As Eleanor Roosevelt once said, “A stumbling block to the pessimist is a stepping-stone to the optimist.”

Pessimism reduces expectations, narrowing the gap between possible outcomes and outcomes you feel good about. This explains why you might be pleasantly surprised after setting low expectations.

Conversely, optimism is about believing that the odds of a positive outcome are in your favor. It’s about waking up in the morning to seek ways to make things better.

Being an optimist or a pessimist defines how you approach your relationships, work, and obstacles. It also determines how you make decisions essential to your future.

As Wall Street legend investor Jim O’Shaughnessy claims, staying optimistic despite negative reports is key to making smart financial decisions.

He says, “We’re fear-based creatures and if I was in the news business, and my only charge was to maximize revenue and eyeballs, I would be focusing on the unusual and the bad because it’s built into our human operating system to be highly attracted to novel dangers.”

The end of the world

Late Hans Rosling, a renowned statistician and public educator, emphasized how significant the misconception is when it comes to observing our world.

He explains that despite having access to reliable data sources, we can become easily overwhelmed by news reports, which can be exaggerated and taken out of context.

One widely conducted study showed that we tend to believe the worst about our world. It found that the primary reason people feel overwhelmed with bad information is because we hear about it disproportionately.

For example, we hear about the spread of deadly viruses and the lack of access to preventive tools like vaccinations, but according to WHO, almost 88% of one-year-old children in the world are vaccinated against common diseases.

The reality is that many positive events happening around us aren’t covered in the news.

120 years of history

The same goes for the world of investing. Stocks rising 2% could warrant a short mention in the evening news, but a 2% decline might be reported in bold, laying out a fearful narrative about reasons for the market going down.

A 50% drop in five months might cause investigation, while a 200% gain taking place over five years often happens more quietly.