Overconfidence undermines our ability to address mistakes

Overconfidence is not an asset but a liability that may affect our decision making, says new study from the Wharton School of the University of Pennsylvania

tick-crossOverconfidence in our beliefs can have significant consequences… right from taking riskier bets on money to ambitious medical treatments. A new research explores the mindset of the overconfident.

The research, by Albert Mannes of The Wharton School of the University of Pennsylvania and Don Moore of the Haas School of Business at the University of California, Berkeley, showed that such a mindset overemphasises the accuracy of the known and undermines the fact that there may be some aspects that are not known or uncertain.

In case we are wrong, it’s better to be wrong on the safe side rather than on the unsafe one — better to be early for a meeting rather than late.

Mannes and Moore conducted three studies to measure the attitudes towards errors given this asymmetric nature of everyday judgements.  They asked the participants to estimate the temperature of the day.  The error margins would be obvious yet only when the researchers provided exaggerated feedback — in which errors were inflated by 2.5 times — were the participants ready to acknowledge the errors and then adjust their views.

“People frequently cut things too close — arriving late, missing planes, bouncing checks, or falling off one of the many ‘cliffs’ that present themselves in daily life,” observe Mannes and Moore.

“These studies tell us that you shouldn’t be too certain about what’s going to happen, especially when being wrong could be dangerous. You should plan to protect yourself in case you aren’t as right as you think you are.”



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