The Illusion of Invulnerability: The Optimism Bias & Layoffs

A must-know for all my corporate guys and gals.

We all aspire to make perfectly rational decisions.

After all, making such decisions increases our chances of attaining the best possible outcomes.

Many times, we assume that if we think long and hard about a particular subject, conduct thorough research, and consult experts, we would be able to make the most optimal decisions.

However, this is far from the truth.

In reality, as humans, it is virtually impossible for us to make perfectly rational decisions. Not only one factor, but a range of influences affects our ability to make rational decisions.

From the subtle influence of the biases we are inherently prone to, to the complex dance of emotions, our very existence as humans renders rational decision-making impossible, irrespective of what Game Theory scholars may claim.

One of the many biases that plague our psyche is our tendency to be overly optimistic. We are quick to put on our “rose-colored glasses” when looking at the world.

Research shows that many people believe good things are more likely to happen to them, while bad things are less likely to occur compared to others. Known as the Optimistic Bias, it is our inclination to believe that things will turn out well in the end.

Ask yourself: Do you believe that you have a higher chance than others of getting a good job, being in a successful relationship, and a lower chance of experiencing severe illness or being laid off? Such thinking is likely, even if you do not consciously realize the existence of these expectations.

LinkedIn Post of a Terminated Employee

In the context of the current global trend of layoffs, the presence of the optimistic bias is even more pronounced. Analysis of LinkedIn posts by terminated employees expressing their disbelief at being made redundant attests to the same.

Costs of Optimistic Bias

While the optimistic bias definitely catches us off-guard in the case of a negative event, it also prevents us from taking appropriate measures if and when the said negative event takes place.

An individual who does not expect to be laid off would not bother taking any steps to secure their future.

Considered as the largest cost of optimistic bias, forgoing self-insurance against potential misfortunate circumstances like sickness, divorce, bereavement, and job loss can have long-term negative effects such as an extended period of unemployment, financial incapacitation, and deteriorating mental and physical health.

Optimistic Bias and Locus of Control

The existence of an optimistic bias underscores the importance of a person’s locus of control.

Locus of control refers to a person’s perception of the level of control they have over a situation.

The more people believe that they are in control of the situation, the less likely they are to prepare for any potential negative event associated with it.

Moreover, in certain cases such as divorces, providing statistics might be ineffectual and not result in debiasing (the process of negating the effect of an existing bias) as statistics tell the story of an average person, and people rarely think of themselves as average.

Mitigating Optimistic Bias

The optimistic bias, especially in the case of employees, can be rectified by providing relevant information.

A significant number of employees believe that, in case of termination, they can rely on the laws and regulations of the state to protect them. However, nearly all organizations include a clause in their employment contracts stating that employees can be terminated at any time at the discretion of the management.

Still, a majority of employees doubt the enforceability of the contract and thus have incorrect assumptions regarding the rights provided to them by the law.

As such, the optimistic bias, in the case of employees with inaccurate assumptions about the contract, can be rectified by making them aware of all the relevant facts, empowering them to make informed decisions.

Further, research has found that such information would encourage employees to negotiate better terms for themselves.

Navigating the Optimistic Bias

If you have ever seen an apocalyptic movie, you would have noticed that there are certain people in the movie who are always prepared in case calamity strikes, going as far as to hoard a bulk of items and construct bunkers in their homes.

While not equivalent in any manner to a natural disaster, the loss of a job can be a nightmare in its own right, and navigating optimistic bias can be considered similar to disaster planning.

When it comes to layoffs and a lack of job security, it is better to always be on the lookout for potential job opportunities. While many people would doubt your loyalty to your organization for even considering another opportunity, most of the time, the management would not think twice before letting you go, and I doubt that the people you fear would question your loyalty would appear out of nowhere to help feed your family.

This is not to say that you need to jump ship any time a new opportunity arises; however, knowing what positions are open in other companies and what the changing market requirements are for your particular job role would surely benefit you in the long run.

Further, I would stress that making connections and having a network of people capable and willing to lend a helping hand is equally essential. You may find your flock on LinkedIn, the largest community of professionals in the world.

It is advisable to build relationships on LinkedIn or any other networking website that is suited to your needs.

Regularly posting content and engaging with others would also help you gain visibility and as more people know you, more people would be there, willing to help out when required.

The Adaptive Nature of the Optimistic Bias

Before we proceed with our swords against optimistic bias, it is important to note that optimistic bias can be beneficial in certain instances.

For example, in a research study by Sharot (2011), it was found that the presence of an optimistic bias in an individual reduces their chances of death between the ages of 50 and 65 by 14%. Optimistic individuals are also 30% less prone to death by cardiac arrest.

Moreover, optimism has been found to extend the lifespans of people suffering from cancer and AIDS.

Finally, when it comes to achieving success in this cut-throat world, optimistic individuals have a better chance of attaining their goals.

So, the optimistic bias might not be all bad, considering the research on the topic, and if you are a perpetually optimistic person, you really have nothing to worry about if you prepare well in advance.

That is all for the first edition of special features, a tech-less special but something that I have wanted to talk about. Truly, however, can we ever be tech-less? Something to think about (or comment, as I prefer).

Until next time,

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