According to the National Bureau of Economic Research (NBER), the recession ended last year.
You could have fooled me.
Of course, the NBER was using a technical definition to make a broad statement about the moment when the overall economy stopped getting worse. Clearly, the effects of the recession are still being felt, but if the economy has indeed stopped getting worse, that’s a little bit of good news that we badly needed. Why then do I, an optimist by nature, continue to recommend cautious concern? Could pessimism be a survival mechanism?
It seems to me that the recession poses the same threat to our business survival as a saber-tooth tiger once did to our physical survival. In both cases, a miscalculation is not merely inconvenient, it could be fatal. So I did a little research and it turns out that paying attention to bad news gave our primitive ancestors an evolutionary advantage.
Pessimism still works today, says Denver psychologist Dr. Shawn Smith on his “Iron Shrink” website because it doesn’t cost us much if we’re wrong. But pessimism can be paralyzing, which is why a lot of industry pundits have recommended that we ignore the bad economic news and focus instead on the positive. Smith agrees that there is value is such “strategic optimism,” but he says that optimists often “get caught with their pants down because, unlike defensive pessimists, they do not plan for worst-case scenarios.”
“Defensive pessimism,” as Smith calls it, builds on a worst-case analysis in ways that strengthen several factors related to performance:
Goals. To avoid failure, the defensive pessimist creates goals and, by doing so, is predisposed to pursue them.
Effort. Smith points to research supporting a link between planning and effort. Dwelling on negative outcomes can be paralyzing, but thinking about how to avoid failure prompts increased effort. And that improves the odds for success.
Expectations. Pessimists start at the bottom, with the lowest possible expectations. As they form plans to avoid negative outcomes, their expectations rise — and so does their confidence.
So, where does that leave you and the NBER’s pronouncement? Things may have stopped getting worse, but until they start getting measurably better, it’s best to fear the worst and adjust your expectations. Make plans to avoid negative outcomes, then increase the effort to succeed.
And keep an eye out for good news.
—Sal Alfano, editorial director, REMODELING.