Overconfidence Bias: The Mother of All Biases
Overconfidence Bias is the tendency to have excessive confidence in our own answers, abilities, and judgments, often leading to errors.
The Psychology Behind It
We have limited self-awareness and tend to remember our successes more than failures. We also confuse familiarity with expertise and fail to account for what we don't know (unknown unknowns).
Real-World Examples
1. Driving
93% of US drivers rate themselves as "above average" - statistically impossible.
2. Investing
Amateur investors trade more frequently than professionals, believing they can beat the market, but underperform due to fees and poor timing.
3. Entrepreneurship
90% of startups fail, but every founder believes they'll be in the 10%.
Consequences
- Risky Decisions: Taking on more risk than warranted
- Failure to Prepare: Not planning for contingencies
- Ignoring Advice: Dismissing expert input
How to Mitigate It
- Seek Disconfirming Evidence: Actively look for reasons you might be wrong
- Get Feedback: Ask others to evaluate your abilities honestly
- Track Your Predictions: Keep a record to see how often you're right
Conclusion
Overconfidence is called the "mother of all biases" because it amplifies every other bias. Humility is the antidote.