Overconfidence Is Overrated
Here's my favorite one. Eighty-four percent of Frenchmen rate themselves as above average lovers. Ninety-three percent of young drivers in another survey said they were above average. And, 68% of the faculty at the University of Nebraska place themselves in the top 25%.
All of those numbers reflect misplaced confidence. It seems to be genetically wired into us in certain ways.
And, you kind of want it to be, at least some of the time. Otherwise nobody would ever open a restaurant. The odds against a positive return on their investment are incredibly daunting. But, the bias towards overconfidence also leads us into fiasco's.
The problem is that we're all vulnerable to overconfidence but none of us believe it. We constantly overestimate our abilities, underestimate those of others relative to our own, and have a near unshakable faith in our beliefs and memories.
So, how do we strike the balance? Our reach should exceed our grasp, except when we knock over a case of glassware at Pottery Barn.
Today, we look at the overconfidence bias.
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- David Dunning is a professor of Psychology at Cornell University
- Daylian Cain is an associate professor of Organizational Behavior at Yale School of Management
- Terrance Odean is a professor of Finance at the Haas School of Business, University of California, Berkeley