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Research The Power and Pitfalls of Positive Thinking People who are optimistic are more likely than others to display prudent financial behaviors, according to research from two profes- sors of finance at Duke University's Fuqua School of Business in Durham, North Carolina. But those who are too optimistic may hinder their prospects, by being too short-sighted in their planning. In their paper "Optimism and Economic Choice," published in the October 2007 issue of the Journal of Financial Economics, Manju Puri and David Robinson compare opti- mists and extreme optimists to gain insight into how psychology affects economic and lifestyle choices. The researchers drew on data from the Federal Reserve Board's Survey of Consumer Finance (SCF), a triennial assessment of U.S. families' finan- cial and demographic information. Although the SCF did not include questions about respondents' level of optimism, it did ask how long they expected to live. The survey also collected the same type of demographic and health-related information that actuaries use to cal- culate life expectancy. Puri and Robinson combined predicted—the top 5 percent of opti- mists—as "extreme optimists." The researchers "A LITTLE BIT [OF OPTIMISM] IS BENEFICIAL, BUT TOO MUCH CAN LEAD TO BAD ECONOMIC CHOICES." found that opti- mists have certain behaviors in com- mon: They work longer hours, invest in individual stock, save more money, pay their credit card balances on time, and plan to retire at a later age. Extreme optimists, on the other hand, work significantly fewer hours and save less money; they also are more likely to be day traders, less likely to pay their credit FOCUS ON FACULTY Unlocking the Power of Information Eller professor Sudha Ram aims to improve the functionality, accessibility, and reliability of data. these data to determine participants' statistical life expectancies. Then, they compared respondents' statistical and self-reported life expectancies. They categorized anyone who expected to live longer than the data predicted as an optimist. They categorized those who expected to live an aver- age of 20 years longer than the data 48 BizEd JANUARY/FEBRUARY 2008 Information is everywhere—billions of pieces of information are being sent, processed, modified, stored, and created as you read this sen- tence. But where did it come from? Who created it? Where is it going? How will it be used? And, most important, how reli- able is it? How orga- nizations answer these questions may be essential to their suc- cess, says Sudha Ram, the McClelland Pro- fessor of Management Information Systems at the University of Arizona's Eller Col- lege of Management in Tucson. To help organizations tap their archived information and turn it into knowledge that will allow their leaders to make the best decisions, Ram is working on research she calls "tracking the digital DNA of objects." This "digital DNA," she says, will help people navigate the moun- tains of data that the world generates on the Internet and in databases around the world. Ram calls her Sudha Ram model "W-7," which refers to seven W's that Ram has identi- fied as crucial to an effective information card balances regularly, and are more likely to smoke. "The differences between opti- mists and extreme optimists are remarkable," says Puri. "They suggest that overoptimism, like overconfidence, may in fact lead to behaviors that are unwise." The researchers hope their find- ings will help individuals understand or even overcome personality char- acteristics that can negatively affect important financial decisions. "Doc- tors tell us that one or two glasses of red wine a day can be really healthy, but no one tells you to drink the whole bottle," says Robinson. "It's the same with optimism. A little bit is beneficial, but too much can lead to bad economic choices."