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Overconfidence Bias – You Are Not As Smart As You Think

Overconfidence Bias – You Are Not As Smart As You Think

Overconfidence bias is the tendency to overestimate our talents and abilities. We consider ourselves better than we really are.

At work, how would you rate yourself? Do you consider yourself an above-average or below-average performer? Remember your answer. I will explain more ahead.

We all know about overconfidence. If I ask you, “Are you overconfident?” you will answer, “No, of course not.”

Yet, overconfidence bias is the biggest of all the biases of the human brain. You can spot overconfidence in others with ease but not your own. You and I are far more vulnerable to overconfidence than we assume.

Overconfidence bias

I am guessing you considered yourself an above-average performer at work. If I ask your colleagues, 60-70% of them would consider themselves above average too. As per math, only 50% should lie above the average or median.

Yet, everyone seems overconfident about their own ability. If you tell people that most consider themselves above average, they retaliate saying “But I really am better than most people at my job.”

Maybe you are, maybe you are not. But the numbers hold a mirror showing the overconfidence in people.

I am writing a set of posts to help you identify how your brain plays games with you. This article is on the topic – The Overconfidence Bias. You can read about all the cognitive biases of the mind.

What is the overconfidence bias?

What is the overconfidence bias?

Overconfidence bias is the tendency to overestimate our abilities and talent. We believe that we are better than we actually are. Due to the simplicity of the phenomenon, most people do not believe that they consider themselves as overconfident. The truth turns out to be the opposite.

The dictionary definition of overconfidence bias is where the subjective confidence of your assumptions is greater than the objective accuracy.

As human beings, we like to feel good about ourselves. We hate being looked down upon. We like to win and feel the best. The problem is, we consider ourselves as a part of the best even when we are not.

Various studies have proved this time and again

  • 65% of Americans consider themselves above average in intelligence(Read Study)
  • 84% Frenchmen believe they are above average lovers
  • 93% of US people think they are above average drivers(Read Study)
  • 87% of the MBA students at Stanford rated their academic performance as above the median

The results make the behavior apparent.

Whether you are a student, an employee, a driver, a lover or a normal man, you exhibit overconfidence in your abilities whether you realize it or not.

Types of Overconfidence

Overconfidence bias shows up in 3 different ways – Overrating, assumption of prediction abilities and unrealistic optimism.

1. Overrating yourself:

Overrating is a type of overconfidence bias where people rate their performance higher than it really is. All the prior examples of people rating themselves above the median are the classic examples of overrating oneself.

2. Assumption of prediction abilities:

In another form, overconfidence bias shows up when you predict a result you have no control over. One good example is predicting the outcome of a sports event. While the prediction of a sporting event comes off as funny, you believe you can predict things you do not control.

You might think “I know my prediction for a sporting event can fail.” I agree. But the same behavior appears when you predict the stock market. Many traders believe they have the clairvoyant ability to predict the next market crash. In reality, nobody has control over the market, but people believe they can predict an outcome.

3. Unrealistic optimism:

In the third form of overconfidence, people believe they can complete a task faster than they actually can.

For example, your friend calls asking if you can meet for lunch. You mention “I need another 10 minutes to finish a task I’m doing.” But, the task never gets done in 10 minutes. It takes well over 10 minutes in most cases, but we presume 10 minutes should suffice.

These 3 types also help you in understanding what causes overconfidence most often.

Related article: How to make the best use of time

Examples of overconfidence in history:

Overconfidence bias exists in experts and newbies alike. If you think experts estimate with a high degree of accuracy, the cases below will illustrate how vulnerable the experts are to overconfidence. Here are some real stories of overconfidence by the experts that will make your jaw drop.

1. Construction of the Sydney Opera House:

The Sydney Opera House stands tall and beautiful. The beauty of the structure garners eyeballs from all around the world. The people behind the construction must have had a ton of experience.

The Opera house was estimated to complete in 4 years with a cost of AUS $7 million. Guess how long the construction took and how much did it cost? Take a wild guess.

The Sydney Opera house took 14 years after the first estimate with a final cost of AUS $ 102 million. You cannot have a better example of unrealistic optimism.

2. Boston Big Dig

The Boston Big Dig runs through the heart of Boston, as the chief highway. The planning of this mega project underwent the same unrealistic optimism as the Sydney Opera house.

The project was scheduled to complete in 1998 at a cost of 2.8 billion dollars. The construction came to an end 8 years behind schedule at a cost of 15 billion. Counting the interest on the debt, the final cost totaled up to roughly 22 billion dollars.

Related article: Why planning goes wrong

3. Forecast of oil prices

In an experiment, researchers asked economics professors to forecast the prices of oil after 5 years. Random people with no knowledge of economics were asked to forecast too.

The forecast of random people was like a dart that landed outside the dartboard. Surprisingly, the predictions from the economics professor did no better. Experts turned out as bad as random people in their forecasts. Yet, the experts believed their predictions would come close to real prices.

A similar pattern has been observed in finance and stock related predictions too.

4. The failure of space missions

The Challenger space shuttle ended in disaster on a fateful day in 1986 killing all seven crew members. The disaster occurred due to the malfunction of a part called the O-ring. The manufacturer of O-ring had recognized the risk of malfunction, but the team believed in the success of the mission.

In a similar case, space shuttle Columbia broke into smithereens killing all seven crew members when re-entering the atmosphere. During the launch, NASA engineers noticed a piece of insulation foam breaking off the tank and hitting the wing.

Though foam shedding had prior cases ranging from minor damage to near-catastrophic, the NASA management chose to do nothing about it.

NASA reasoned saying even if the damage was confirmed, the crew could do nothing to fix it. However, the fact that no one attempted to check for damage and repair when the lives of 7 astronauts were at stake, is not only baffling but also shows overconfidence.

5. The Everest Disaster

In 1996, a group of people attempted to scale the mighty Everest. On their way down, a snowstorm led to the death of eight people. Among the eight casualties were two elite mountaineers who operated as group leaders and had scaled Everest many times before.

During the ascent, the team faced difficulties due to delays and a possible snowstorm. The deadline to reach the summit is 14:00 to complete the descent safely.

In spite of life-threatening conditions, the 2 veteran mountaineers, decided to proceed further in spite of crossing the deadline of 14:00. They were confident of returning home. but unfortunately, the conditions ended as a disaster.

Though other unforeseen reasons played a role in the disaster, the lead mountaineers deciding to exceed the turnaround time of 14:00 was one of the primary ones.

6. The Chernobyl Nuclear Disaster

The Chernobyl Nuclear Disaster occurred in 1986. In this case, an employee approved a test which he and the operations team did not fully understand. Due to their decision, the plant operated at a point beyond the region of safety.

The safety design group had not approved the plan. The sense of urgency and confidence due to previous trouble-free operations led to the error in judgment.

How does overconfidence bias affect you?

When you look at these incidents, the effect of the overconfidence bias becomes obvious. Thinking you are not overconfident is the main reason behind the consequences.

Whether you are an expert in your area or a complete newbie, you will always commit mistakes due to overconfidence. Decision making is one area where the bias can hit you hard.

You have to be watchful of daily events to spot where you show signs of overconfidence. Here are a few examples:

1. Estimating timelines

Soon timeline

Like the people behind the planning of the Sydney Opera House and the Big Dig, you and I can make incorrect estimations all the time. The consequences might lead to extra billions spent, but your daily life gets hampered.

You regularly overestimate the pace at which you complete a task. You believe you can complete many tasks by the end of the day. At the end of the day, if you end up with a pile of incomplete tasks that spill over to the next day, it is a sign that you overestimate your ability to complete tasks.

Though you know unexpected scenarios will eat up your time, you fail to account for it.

Related article: How to prioritize tasks the right way

2. Believing you do not need to learn because you are skilled

As explained in the examples earlier, a vast majority of the people consider themselves above average.

At work, people assume themselves to be better than most others. Due to this overconfidence, the need to learn and improve seems unnecessary. Over a while, employees stagnate at what they do. This leads to lower annual raises, lack of promotions or even layoffs. In such scenarios, people blame their organization or their bosses but never themselves.

The amount of people who have lost jobs in their 40’s and struggled to find an equally paying job after is a testament of people failing to improve. People reach a comfort level after a certain point and believe they no longer need to learn.

3. Thinking you can do it

Thinking you can do it

Due to the overestimation of our skills, we tend to believe that we can do more than what we are capable of.

Go to a gym and you will always notice a person who recently joined the gym lifting more weight than his limits. But that guy will not be a complete newcomer. Only after learning a few exercises does the newcomer attempt to go heavier for quicker results. The process ends up with damage and injury.

Another clear example is the attempt at entrepreneurship. Many people believe they can start their own business and lead it to the path of success, making it a Fortune 500 company. Yet, they fail at the initial few steps.

Without considering the risks, hard work and sacrifice required, people tend to believe they can do it. 90% of the startups fail , yet the majority of the entrepreneurs believe they will end up in the 10%.

I am not saying that you must not dream big or be confident in your skills. If not for confidence, marvelous innovations such as a computer, electricity, phones, and planes would not exist today.

Make sure your confidence does not turn into the overconfidence of the drunk driver behind the steering wheel.

4. I do not need to write it down

The biggest lie we tell ourselves is “I do not need to write it down, I will remember it.” In spite of forgetting a hundred thousand important things in the past, we still believe we possess the memory of a whiz kid. To make it worse, we truly believe we will remember.

Cultivate a habit of writing things down. In the age of smartphones, it takes a second to write down things you must remember. You have limited memory and the chances that you will win the coveted title of Grand Master of Memory are scant.

5. Assuming you are better than the experts

I am good

Any newcomer who has gained mid-level experience in a domain believes that he is on par with the best. This applies across domains and industries. People in programming, the stock market, sports, fitness, entrepreneurship, or any other field, who are average believe they are better than the legends of their industry.

Analysts of the stock market believe they have cracked the secret and go big, incurring huge losses. Average boxers believe they could beat the champion in a fair fight. The examples are many.

Such a mindset nips your growth in the bud. When you believe you already possess the skills, you will refrain from putting in an effort to get better. Overconfidence leads to lesser learning.

How can you overcome the overconfidence bias?

Overconfidence bias is the mother of all biases because though we spot it in others, we fail to spot it in ourselves. Even when we can notice some forms of overconfidence, we refuse to believe it.

Overconfidence is hard to spot because it triggers from your subconscious. By instinct, you tend to overestimate. Your conscious brain does not even question it on most occasions.

Here is how you can avoid overconfidence bias:

1. Think of the consequences

While making a decision, think of the consequences. For example, when you believe you have found the next best stock and decide to put a big sum of money in it, calculate what would happen if you went wrong. When you realize how badly a decision can hurt you, you will have a reality check.

2. Act as your own devil’s advocate

When estimating your abilities, challenge yourself. When you play the role of the devil’s advocate, you will ask yourself the right questions.

For example, if you believe your startup will succeed, you can challenge yourself with questions like

  • What is so special about your business that no one else has?
  • Why do you have higher chances of success than your competitor given that you have no experience?
  • Why will the public turn into your customers?
  • You do not have to be pessimistic. You just have to be realistic.

3. Have an open mind

Have an open mind about the possibility of making a mistake. When you have the humility to admit your weaknesses, you will also gain the insight to overcome it.

When you believe you will make no mistakes, your weaknesses remain as they are and your strengths seem stronger than they are. Always think of an opportunity to do better by aiming to do a little better every day.

4. Reflect on your mistakes

Everyone makes mistakes every day. No exceptions. Successful people identify them and learn not to repeat them. The mediocre ignore them like they never happened.

Spend 10 minutes every evening thinking what mistakes could have been avoided and what could you have done better. This reflection alone will prevent you from committing the mistake again. Learn the best way to reflect on your mistakes daily.

5. Pay attention to feedback

You receive feedback every day.

  • Your boss tells you the code you wrote is running slow
  • Your spouse tells you the garbage is full
  • Your friend tells you you haven’t called in a long time

You can identify feedback in such statements. If you pay enough attention, you can identify an area to improve based on such feedback. Feedback does not always have to be over a one on one conversation on a serious note in a meeting room. Feedback comes in from all corners if you keep your eyes and ears open.

overconfidence self improvement personal development cognitive bias


If you win your inner battle against the overconfidence effect, you grow, avoid mistakes and develop in all spheres on life. Not only does it help you with your growth, but it helps you blossom into a better human overall. So be humble, be open-minded and be thoughtful.

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