Series 2, Episode 5: Overconfidence
As we start this episode, I’d like us to pause for a moment to reflect on what we’ve learned so far… mainly as a way to introduce the behavioural bias we’ll be discussing in this episode.
We’ve covered confirmation bias, which sees us seeking out information that supports our existing beliefs, we’ve looked at framing, how the way in which information is presented impacts our decisions, and we’ve looked at anchoring, where we place too much emphasis on the first piece of information we see.
Now underpinning all of these biases, and many more that we’ll discuss over the course of this series, is one big, powerful behavioural bias. This bias kind of gives all the other biases permission to exist. What could be so powerful I hear you ask?…Well, the bias we are talking about today, is overconfidence.
Overconfidence is a solid human trait, and is present in each and every one of us, to some degree or another. Some of us are naturally more overconfident than others. Some of us become more overconfident than others at particular times, or when doing particular things, like investing money. There is a related behavioural bias here called The Dunning-Kruger Effect, which we’ll look at in a later episode.
Overconfidence, as a behavioural bias, can easily lead to sub-optimal, or far from ideal outcomes. But worse still, it can lead to outright disaster.
Think about the Titanic as an isolated incident. Not only was it framed as “unsinkable”, which just helped strengthen people’s overconfidence, even when it hit the iceberg and started to sink, people still refused to believe it would sink. It has been suggested by historians and psychologists, that overconfidence was one of, if not the, contributing factor to the sinking of the Titanic. Overconfidence can have dramatic and devastating impacts if left unchecked.
But while that story is easy to understand, what exactly is overconfidence? When we say overconfidence, what do we mean?
Overconfidence is caused when our subjective belief, a self-assessment of our knowledge, skills, or abilities falls short of our actual knowledge, skills, and abilities. For example, in a research study in the US, 93% of drivers rated their driving ability as better than average.
Now, for those with even a tiny understanding of statistics, this is, of course, statistically impossible. Yet, asked to self-rate our abilities - driving a car - and we see ourselves as better than most other people. This is true if you ask people about how they believe they compare to others in relation to recycling, parenting skills, being a good husband/wife… the list goes on, and on each occasion, people rate themselves higher, or better, than reality could prove..
So the question is, where do you sit on the confidence scale? How overconfident am you?
A SIMPLE TEST
Well let’s check by doing a really, simple test. Play along, and I will hopefully give you an insight into your confidence.
I’d like you to answer the following question. It’s a true / false question. Ready?
OK - the question is this… “The human brain absolutely no fat?” Is that true or false?
Now, how confident are you that your answer is correct? If we use a scale of 1-10, with 1 being not at all confident, and 10 being absolutely confident, where would you put yourself on that scale? Be honest, else this won’t really work!
Now, if you absolutely guessed your answer, which I suspect most people did and you were being honest with yourself, you should have placed yourself at 1 on the scale. You’re guessing, right, so therefore, how can you have any confidence in a guess?
However, the evidence shows that even if you did completely guess, you’re more likely to have picked 2, 3, or 4? Am I right? This means that even though you are guessing, you haven’t admitted to yourself that it is actually a complete guess and you have no idea.
OVERCONFIDENCE AND ITS SIBLING
But this exercise also brings out the sibling of overconfidence - and that is underconfidence.
There will be those who answered that question, who knew the answer, and answered false (correctly), but doubted their knowledge. ”Oh, but I’m not sure I’m right” and will have rated themselves as a 6 or a 7, even though they knew the answer.
As one psychologist said, think of overconfidence as walking on the edge of a cliff…and underconfidence being quicksand. We want to avoid both if we can, and find a way through, avoiding the cliffs and the sinking sand.
And it can be done. We just need to be absolutely honest with ourselves and have the courage to admit that we’re wrong, or the courage to go with our convictions when we know we are right.
It’s about knowing our limitations, listening to the facts, considering all the possibilities, and when you think of it like this, you can see how framing, anchoring, and confirmation bias are so easily fuelled by our overconfidence.
By the way - the answer as I said is false. The human brain contains at least 60% fat, so well done if you got that question correct.
TIPS AND TRICKS
Three great tips I would suggest you adopt for keeping overconfidence (or underconfidence) in check are:
First off, learn to challenge your own beliefs. Play Devil’s advocate with your own thoughts and opinions.
Work through your mistakes and shortcomings. Learn to accept what you’re good at and what you aren’t good at.
But - most of all - be realistic, be honest, and be humble.
We need to make decisions in life that will give us the best possible outcome, and of all the behavioural biases we’ll discuss on this podcast, keeping your confidence level operating at the right level, will give you the best chance at making great decisions.
That’s it for this episode. Join me next time on Bitesize Behaviours when we explore the bias of loss aversion.