The Thing About New Year Resolutions Is…

2017It is that time of the year when people are planning what to do on December 31, as well as their New Year resolutions. The New Year resolutions tend to be tricky things. Even though they are largely never implemented, many people never stop making them or continue making them over many years.

There is this inherent belief that come what may we will follow the resolution this time around. It doesn’t matter that we have abandoned many New Year resolutions over the years that have gone by. Or to put it slightly differently, there is a certain amount of optimism built into making New Year resolutions, year after year.

As Daniel Kahneman writes in Thinking, Fast and Slow: “Optimism is normal, but some fortunate people are more optimistic than the rest of us. If you are genetically endowed with an optimistic bias, you hardly need to be told that you are a lucky person—you already feel fortunate. An optimistic attitude is largely inherited, and it is part of a general disposition for well-being, which may also include a preference for seeing the bright side of everything.”

And this optimism essentially ensures that we keep making new year resolutions year and year. This general optimism about things spills over to other areas of life as well. In fact, many years back, there was a very interesting piece of research carried out by two American psychiatrists, Caroline Preston and Stanley Harris. They asked drivers to rate their skill, ability as well as alertness, the last time they were driving.

As Jason Zweig writes in Your Money and Your Brain about this research: “Just under two-thirds of drivers said they were at least competent as usual. Many described their most recent drive with terms like “extra good” or “100%.””

The trouble was all this did not make any sense. The researchers Preston and Harris had conducted all their research interviews on drivers who had started in their own cars but ended up in an ambulance, after an accident. “68% of these drivers were directly responsible for their crashes, 58% had at least two past traffic violations,… and 44% would ultimately face criminal charges,” writes Zweig. This after, only five out of the 50  drivers, admitted to the researchers for even being partially responsible for the crash.

This shows the general human tendency to be optimistic and overconfident about many things in life. In fact, a later survey with drivers who had a clean driving record, found that 93% of them felt that they were above-average drivers.

This optimism about oneself reflects in other areas of life as well. In fact, Zweig provides a very interesting example of how when he asks people about their savings while making speeches, they think that they save 1.8 times the average person. Of course, this is not possible.

On the flip side, optimism and overconfidence have positive aspects as well. It is the engine that keeps capitalism going. The larger point being that if people knew their odds of succeeding (or rather failing) while initiating a new thing, in many cases they would never do it at all.

As Kahneman writes: “More often than not, risk takers underestimate the odds they face, and do not invest sufficient effort to find out what the odds are. Because they misread the risks, optimistic entrepreneurs often believe they are prudent, even when they are not. Their confidence in their future success sustains a positive mood that helps them obtain resources from others, raise the morale of their employees, and enhance their prospects of prevailing. When action is needed, optimism, even of the mildly delusional variety, may be a good thing.”

Ultimately, any country goes from being a developing country to being a developed country, only if there are enough entrepreneurs out there dreaming about building a company and in the process creating jobs. Hence, optimism and overconfidence does have a role to play in everyday life.

The column originally appeared in Bangalore Mirror on December 28, 2016

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About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

2 Responses to The Thing About New Year Resolutions Is…

  1. Hi Vivek, looks like your twitter ID has been deleted. I cannot see you on twitter anymore. Hope the government did not crack down on you.

  2. agnostic says:

    One can dream all that one wants, but progress will only come if the regulations and conditions make the dreams feasible. Otherwise, to use a cliche, IF wishes were horses, beggars would ride.

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