Overconfidence
Some 1,741 papers have explored the concept of
overconfidence. These are additional notes to those
delivered during the conventional lectures.
Paper 1
Paper 6
Graphical Estimates
Paper 2
Paper 7
Quiz
Paper 3
Paper 8
Paper 4
Paper 9
Paper 5
4.1
Monday, 21 March 2016
6:01 PM
Overconfidence 1
The general public know more about issues critical to
policing than the police themselves. Researchers
examined misconceptions of legal issues by law
enforcement officers compared to the general public’s
knowledge on these topics.
“Overconfidence is a common characteristic in
professional industries, as there is an assumption by
professionals that they must know more about their
own topics than outsiders. However, when applied to
policing, this can have severe consequences for our
justice system.”
4.2
Overconfidence 1
“This research shows
that British police do not
know enough about things
like how eyewitness
memory works, how to
effectively question
suspects, and what kinds
of services offenders
have access to.”
British police are mistakenly overconfident about issues critical to policing
Confidently Wrong: Police Endorsement of Psycho-Legal Misconceptions
Chloe Chaplin and Julia Shaw
J. Police Crim. Psych. 2015 DOI: 10.1007/s11896-015-9182-5
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4.3
Overconfidence 2
It is argued expert opinions are often considered
infallible.
But expert advice or estimates are often compromised
by "cognitive frailties," which include the expert's
mood, values, whether they stand to gain or lose from a
decision and the context in which their opinions are
sought.
"Experts are typically unaware of these subjective
influences."
"They are often highly credible, yet they vastly
overestimate their own objectivity and the reliability
of their peers."
4.4
Overconfidence 2
It was vital that the conventional
approach of informing policy
through expert advice - either
individuals or panels - be
balanced with methods that
alleviate any psychological and
motivational bias.
Australians were once told that
cane toads were not a threat to
the local environment, while much
of the world came to the
conclusion in 2003 that Iraq had
weapons of mass destruction.
4.5
Overconfidence 2
"Experts must be tested, their biases minimised, their
accuracy improved and their estimates validated with
independent evidence," the authors write.
"Experts should be held accountable for their
opinions."
Policy advice: Use experts wisely
William J. Sutherland, Mark Burgman
Nature 2015 526(7573): 317-318 DOI: 10.1038/526317a
Using experts 'inexpertly' can lead to policy failure
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4.6
Overconfidence 3
Will Venezuela cut gasoline
subsidies? Will the US Federal
Reserve raise interest rates before
the end of the year? Your guess is as
good as mine, unless you happen to be
what Tetlock and Gardner have
identified as a “super forecaster.”
When we decide to change jobs, make an investment, or
launch a business, we make that decision based on what we
think the future will hold. The problem is, we’re just not
that good at accurately anticipating the future. We’re
susceptible to hindsight bias, we’re overconfident about
what we really know, and our predictions are often selfserving.
4.7
Monday, 21 March 2016
6:01 PM
Overconfidence 3
Super forecasters, on the other hand, are able to
overcome many of these cognitive hurdles, helping
them forecast future global events with surprising
accuracy.
“I call them super forecasters because that is what
they are. Reliable evidence proves it,” Tetlock and
Gardner write in a 2015 book.
To understand what makes super forecasters so good,
researchers recruited thousands of volunteers to
compete in a forecasting tournament sponsored by the
government group Intelligence Advanced Research
Projects Activity. The results have been published.
4.8
Overconfidence 3
All forecasters were then ranked according to their
performance. The top 60 participants, who had
exceptionally high accuracy, were dubbed super
forecasters. These individuals were so good at
predicting geopolitical events that their answers were,
on average, almost 30% more accurate than those of
career intelligence agents.
“Are super forecaster’s different kinds of people — or
simply people who do different kinds of things?”
Mellers et al. (2015) asked in a study. Their data
suggests that the answer is a blend of both.
4.9
Overconfidence 3
Forecasters who received training to help them
overcome cognitive biases were better at predicting
compared to those without training. Each training
module was interactive and included questions and
answers to check participants’ understanding of
probability, and judgmental traps such as
overconfidence, the confirmation bias, and base-rate
neglect.
People were also better forecasters when they worked
together in collaborative teams. Importantly,
teamwork allowed people the opportunity to discuss
the rationales behind their beliefs. Having to provide
evidence for their answers helped teams avoid
cognitive biases and errors in their predictions.
4.10
Overconfidence 3
Finally, the best performers from the first year of the
tournament (i.e., the top 2%) were placed together in
elite “tracked” teams made up of only super
forecasters. These teams significantly outperformed
all of the other groups. Notably, individuals on these
elite teams were more likely than other groups to
share relevant news and ask questions with their
teammates.
“Super forecasters have achieved a surprising degree
of accuracy — and this may be just the beginning of
those surprises,” Mellers et al. (2015) conclude.
4.11
Overconfidence 3
Superforecasters: The Art of Accurate Predictions
Mellers, B., Stone, E., Murray, T., Minster, A., Rohrbaugh, N., Bishop, M. and
Tetlock, P. (2015). Identifying and Cultivating Super forecasters as a Method of
Improving Probabilistic Predictions. Perspectives on Psychological Science, 10(3),
267-281. DOI: 10.1177/1745691615577794
Mellers, B., Ungar, L., Baron, J., Ramos, J., Gurcay, B., Fincher, K., and Tetlock, P. E.
(2014). Psychological strategies for winning a geopolitical forecasting tournament.
Psychological Science, 25(5), 1106-1115. DOI: 10.1177/0956797614524255
Tetlock, P. E., and Gardner, D. (2015). Super Forecasting: The Art and Science of
Prediction. New York: Crown
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4.12
Overconfidence 4
The Alan Sugar syndrome: How overconfidence can
make you more successful in the workplace ... even if
you have less talent.
Overconfidence really does make some people more
successful than others, according to psychologists.
Some may feel it explains the apparent fame and
fortune of shameless self-publicists like footballers,
reality TV stars and celebrities such as Alan Sugar and
Piers Morgan.
4.13
Overconfidence 4
Those who genuinely believe they are wonderful will do
better than others who may be more talented but lack
the same self-belief, said the study.
Did Sir Alan Sugar earn his
millions by being overconfident? Researchers
believe overconfidence really
does make some people more
successful than others?
Where is Amstrad based?
Brentwood – Essex.
4.14
Overconfidence 4
Piers Morgan is a British journalist known for his
confidence when it comes to asking probing questions.
4.15
Overconfidence 4
As a result, reality TV stars like the cast of The Only
Way Is Essex or Kim Kardashian achieve huge wealth
and celebrity status to the consternation of millions.
Apparently Kim Kardashian is an outgoing American
socialite that rose to “fame” in 2012.
The girls from The Only Way Is Essex have jumped
to stardom by playing themselves!
Where is Towie based?
Brentwood – Essex!!
4.16
Overconfidence 4
The study found that the overconfident are masters at
self-promotion but they are also the ones who most
desire a higher social status.
For ordinary workers it can lead to promotion above
colleagues with similar talents but without the ability
to exude overconfidence.
In the UK, some may see these
traits in plenty of famous people
who appear not to necessarily be
any more talented than their
peers but know how to blow
their own trumpet, such as
Twitter-mad football bad boy
Joey Barton for instance.
4.17
Overconfidence 4
People who are overconfident genuinely believe they
are “more physically talented, socially adept and skilled
at their job than they actually are” said the study.
In terms of climbing the ladder, it does them no harm
at all. But there is a downside. But be warned:
“Overconfidence can have detrimental effects on their
performance and decision making.”
Those who are overconfident often want power, fame
or success, said the report. “Our studies found that
overconfidence helped people attain social status.”
4.18
Overconfidence 4
“People who believed they were better than others,
even when they weren’t, were given a higher place in
the social ladder.”
“And the motive to attain higher social status thus
spurred overconfidence.”
Overconfident people will make sure they get noticed.
4.19
Overconfidence 4
Researchers have long known that people are very
frequently overconfident - that they tend to believe
they are more physically talented, socially adept, and
skilled at their job than they actually are.
For example, 94% of University staff think they do
above average work (which is nearly impossible,
statistically speaking). But this overconfidence can also
have detrimental effects on their performance and
decision-making. So why, in light of these negative
consequences, is overconfidence still so pervasive?
4.20
Overconfidence 4
The lure of social status promotes overconfidence,
"studies found that overconfidence helped people
attain social status. People who believed they were
better than others, even when they weren't, were
given a higher place in the social ladder. And the
motive to attain higher social status thus spurred
overconfidence."
4.21
Overconfidence 4
Social status is the respect, prominence, and influence
individuals enjoy in the eyes of others. Within work
groups, for example, higher status individuals tend to
be more admired, listened to, and have more sway over
the group's discussions and decisions. These "alphas"
of the group have more clout and prestige than other
members.
The research findings are important because they help
shed light on a long standing puzzle: why
overconfidence is so common, in spite of its risks. The
findings suggest that falsely believing one is better
than others has profound social benefits for the
individual.
4.22
Overconfidence 4
Moreover, these findings suggest one reason why in
organizational settings, incompetent people are so
often promoted over their more competent peers. "In
organizations, people are very easily swayed by others'
confidence even when that confidence is unjustified."
"Displays of confidence are given an inordinate amount
of weight."
Organizations would benefit from taking individuals'
confidence with a grain of salt. Yes, confidence can be
a sign of a person's actual abilities, but it is often not
a very good sign. Many individuals are confident in
their abilities even though they lack true skills or
competence.
4.23
Overconfidence 4
It is important to note that group members did not
think of their high status peers as overconfident, but
simply that they were terrific. "This overconfidence
did not come across as narcissistic." "The most
overconfident people were considered the most
beloved."
"These big participators were not obnoxious, they
didn't say, 'I'm really good at this.' Instead, their
behaviour was much more subtle. They simply
participated more and exhibited more comfort with
the task - even though they were no more competent
than anyone else."
4.24
Overconfidence 4
De-emphasizing the natural tendency toward
overconfidence may prove difficult but this research
will give people the incentive to look for more objective
indices of ability and merit in others, instead of
overvaluing unsubstantiated confidence.
Alan Sugar syndrome: How overconfidence can make you more successful in the
workplace...even if you have less talent - Daily Mail - 14 Aug 2012
Why are people overconfident so often? It's all about social status - ScienceDaily
- 13 August 2012
A Status-Enhancement Account of Overconfidence
By:Anderson, C; Brion, S; Moore, DA; Kennedy, JA
Journal Of Personality And Social Psychology 2012 103(4) 718-735 DOI:
10.1037/a0029395
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4.25
Overconfidence 5
Consumers give up on using products because they
underestimate their learning abilities.
Consumers are overconfident in their abilities to learn
skill-based products before they try them out. But as
soon as they gain experience with the product they
often quit using it. "Anyone who has tried, then rapidly
abandoned snowboarding, knitting, fancy new software
or the calendar on their iPod can probably ruefully
relate."
4.26
Overconfidence 5
The authors studied tasks new to most people, which
wouldn't take long to learn in a laboratory setting, like
typing on a keyboard with an unfamiliar layout, tracing
lines while only being able to view the tracing in a
mirror, and folding t-shirts in a novel way. Participants
were given verbal instructions and then were asked to
predict how rapidly they would be able to perform the
task. Initially, participants overestimated their
abilities.
4.27
Overconfidence 5
Next, participants were given a short amount of
experience with the task and were asked to predict
how rapidly they would be able to perform the task,
both in the short term and longer term. "Not only were
subjects overly pessimistic about their ability to
perform the task in the short term, but they were also
overly pessimistic about their ability to improve over
time," the authors write. Participants began correctly
predicting their performance after four rounds (20
minutes) of under-predicting.
4.28
Overconfidence 5
Because of this initial discouragement, consumers were
willing to pay more for a keyboard before they had
tried it, than they were after they gained a few
minutes experience with it.
"Much of parenting is about teaching children that
persistence pays off - that tasks that initially seem
difficult become easier with practice." "The results of
these studies suggest that, despite the lessons our
parents might have sought to teach us, most of us have
not fully learned the lesson."
Practice makes perfect? Consumers overestimate their ability to learn prior to
purchase - ScienceDaily - 21 July 2010
Underpredicting Learning Following Initial Experience with a Product.
Darron Billeter, Ajay Kalra, and George Loewenstein.
Journal of Consumer Research 2011 37 723-736 DOI: 10.1086/655862
4.29
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Overconfidence 6
Chief Executive officers (CEOs) need to demonstrate
strong leadership and good decision-making skills, but
CEOs with over-confidence can involve their companies
in riskier ventures and put investors' funds at risk.
"Over-confident CEOs feel they have superior
decision-making abilities and are more capable than
their peers." "Unfortunately, they tend to make
decisions about mergers or acquisitions that can be
viewed as risky. For example, CEOs who are overconfident tend to target companies that do not focus
on their core line of business. Generally speaking,
mergers that diversify companies don't work."
4.30
Overconfidence 6
CEOs who are over-confident often use cash to
purchase or merge with other businesses. Overconfident CEOs do this because they believe their
stock is undervalued. This action can deplete a company
of important resources and leave it vulnerable to
financial problems.
"In our study, we focused on mergers and acquisitions
because those actions can involve millions and billions
of dollars." "Mergers and acquisitions can either
strategically position companies or they can bankrupt
them."
4.31
Overconfidence 6
While over-confident CEOs can be found in companies
across the globe, over-confident CEOs tend to come
from countries with cultures that emphasize
individualistic characteristics compared to CEOs who
are from countries that have cultures emphasizing
"long-term orientation" or success through more
conservative financial actions.
Cultures that emphasize individual characteristics can
be found in the U.S., France, Germany and the United
Kingdom, while cultures that emphasize more "longterm orientation" can be found in Japan, Brazil and
Mexico.
4.32
Overconfidence 6
"An over-confident CEO can be a good asset to a
company, but investors need to know how to determine
if that is the case." "Over-confident CEOs tend to be
more at ease and successful when launching innovative
products or services and breaking through corporate
inertia. No one wants to follow a timid leader;
confidence is very contagious and can enhance investor
interest and help with innovation. Confidence can
create many positive actions for a company."
4.33
Overconfidence 6
When deciding to invest in a company, new investors
should review the financial fundamentals of the
company, but also determine the personality of the
CEO. If the CEO appears to be over-confident, it's
important that the board of directors is independent.
The answers to the following questions should help
investors determine if they are interested in buying
the company's stock.
4.34
Overconfidence 6
Investors should ask questions such as:
• Who is looking over the CEO's shoulder and
determining if decisions are being made too fast?
• Is the board asking good questions before major
decisions are made?
• Does the CEO follow the board's direction or make
decisions without any consultation with board
members?
Over-confident CEOs can put companies at risk, study finds - ScienceDaily - 9 July
2013
CEO Overconfidence and International Merger and Acquisition Activity.
Stephen P. Ferris, Narayanan Jayaraman, Sanjiv Sabherwal.
Journal of Financial and Quantitative Analysis 2013 48(01) 137-164 DOI:
10.1017/S0022109013000069
4.35
Overconfidence 6
Another result.
• We examine the relation between overconfident
CEOs and corporate debt maturity.
• Consistent with a demand side story, overconfident
CEOs prefer shorter-term debt.
• Overconfident CEOs use more short-term debt due
within 12 months.
• We reject six possible alternative drivers including
a supply side explanation.
• The behaviour of overconfident CEOs is not
deterred by the liquidity risk that firms face.
CEO Overconfidence and Corporate Debt Maturity
Ronghong Huang, Kelvin Jui Keng Tan, Robert W. Faff
Journal of Corporate Finance 2016 DOI: 10.1016/j.jcorpfin.2015.10.009
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4.36
Overconfidence 7
People who think they know it all really might.
Researchers found an 'exaggerated view of intellectual
ability and knowledge' generally predicted academic
achievement, especially on individual course work.
However, they say that 'intellectual humility' does help
more in the learning process.
Researchers found an 'exaggerated view of intellectual
ability and knowledge' generally predicted academic
achievement, especially on individual course work.
4.37
Overconfidence 7
Researchers measured 'intellectual humility,' based on
such traits as 'open to criticism' and 'knows what he/she
is not good at.'
They also measured 'intellectual arrogance,' based on
such traits as 'is close-minded' and 'believes own ideas
superior to others' ideas.'
'One possibility is that they know what they know and
that translates to increases in academic performance.‘
Groups in the study tended to view people as
intellectually arrogant whom they saw as being high in
dominance, extraversion and wanting to be the center of
attention, but low in agreeableness and conscientiousness.
4.38
Overconfidence 7
'People can agree or reach consensus about whether
another person is intellectually humble or intellectually
arrogant, but 'it takes time.'
With group projects, other team members gave better
evaluations to those they viewed as humble and willing to
learn — something that has important implications when
collaboration is needed in the classroom, workplace and
other situations.
When rating themselves on a 'humble-ometer,' people
generally did not see themselves as others saw them.
4.39
Overconfidence 7
Accordingly, nearly everyone may agree that someone like,
say, Donald Trump is egotistical — except Donald Trump.
Republican presidential debate: Donald Trump's
immigration plan savaged by rivals - Telegraph - 11
Nov 2015
On the subject of immigration, Mr. Trump, the
frontrunner in the polls stressed the need to build a
"wall":
“We will have a wall. The wall will be built. The wall
will be successful.”
Asked directly by a moderator if he would deport
immigrants, Mr. Trump said, "You will have to send
people out."
Donald Trump fights on in row over Scottish golf course - FT - 8 Oct 2015
Donald Trump’s fight against a Scottish wind farm went to the UK Supreme Court on Thursday, the latest stage in
the campaign by the US developer and presidential candidate to keep turbines out of view of his Aberdeenshire
golf course.
Donald Trump's £1bn golf course rejected - Telegraph - 29 Nov 2007
Donald Trump's controversial plans to build a £1billion golf resort along a stretch of unspoilt coastline have been
dealt a fatal blow.
Councillors have rejected the proposals for two links courses, a five-star hotel, a golf academy, nearly 1,000
4.40
holiday homes and 500 private houses in one of the biggest single property developments seen in Scotland.
Overconfidence 7
When rating themselves on a 'humble-ometer,' people
generally did not see themselves as others saw them.
The finding was a surprise to researchers, who had
theorized that 'intellectual humility' - having an
accurate or moderate view of one's intelligence and
being open to criticism and ideas - would correlate with
academic grades.
Being full of oneself when it came to rating one's
intellectual arrogance — an exaggerated view of
intellectual ability and knowledge - instead generally
predicted academic achievement, especially on
individual course work.
4.41
Overconfidence 7
'If people are forming opinions about extraversion and
someone talks a lot, it's easy to draw consensus about
that person.'
'But it's more challenging for groups to recognize what
behaviour reveals another person's humility, as
opposed to simply being shy or unsure.
'What I think is important about intellectual humility
is its necessity for not only science, but for just
learning generally — and that applies to the classroom,
a work setting, wherever.'
4.42
Overconfidence 7
'Learning something new requires first acknowledging
your own ignorance and being willing to make your
ignorance known to others.
'People clearly differ in terms of their willingness to
do something like that, but that willingness to learn,
change one's mind and value the opinion of others is
really needed if people and groups are going to develop
and grow.'
4.43
Overconfidence 7
'People who think they know it all - or at least, a lot may be on to something, according to a study.
The finding was a surprise to researchers, who had
theorized that "intellectual humility" - having an
accurate or moderate view of one's intelligence and
being open to criticism and ideas - would correlate with
grades.
But being full of oneself when it came to rating one's
intellectual arrogance - an exaggerated view of
intellectual ability and knowledge - instead generally
predicted academic achievement, especially on
individual course work.
4.44
Overconfidence 7
"One possibility is that people who view themselves as
intellectually arrogant know what they know and that
translates to increases in academic performance."
The study also revealed that:
• When rating themselves on a "humble-ometer,"
people generally did not see themselves as others
see them.
• With group projects, other team members gave
better evaluations to those they viewed as humble.
• People can agree about whether another person is
intellectually humble or intellectually arrogant, but
it takes time.
4.45
Overconfidence 7
Groups tended to view people as intellectually arrogant
whom they saw as being high in dominance,
extraversion and wanting to be the centre of
attention, but low in agreeableness and
conscientiousness.
Participants were able to reach a statistically
significant consensus about how they viewed a person.
4.46
Overconfidence 7
"If people are forming opinions about extraversion and
someone talks a lot, it's easy to draw consensus about
that person." "But it's more challenging for groups to
recognize what behaviour reveals another person's
humility, as opposed to simply being shy or unsure.
4.47
Overconfidence 7
"What I think is important about intellectual humility
is its necessity for not only science, but for just
learning generally - and that applies to the classroom, a
work setting, wherever." "Learning something new
requires first acknowledging your own ignorance and
being willing to make your ignorance known to others.
People clearly differ in terms of their willingness to do
something like that, but that willingness to learn,
change one's mind and value the opinion of others is
really needed if people and groups are going to develop
and grow."
4.48
Overconfidence 7
People with higher 'intellectual arrogance' get better grades: But humble people
got higher evaluations from team members on group projects - ScienceDaily- 6
October 2015
Know-it-alls really DO: Researchers find the overconfident have higher grades Daily Mail - 7 Oct 2015
Contrasting self-report and consensus ratings of intellectual humility and
arrogance
Meagher, BR; Leman, JC; Bias, JP; Latendresse, SJ; Rowatt, WC
Journal Of Research In Personality 2015 58 35-45 DOI:
10.1016/j.jrp.2015.07.002
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4.49
Overconfidence 8
They are regularly accused of being too confident –
even cocky – but the highest achievers are more often
than not those who over-rate their ability.
Now researchers believe they have discovered, for the
first time, why humans have a false sense of optimism.
Computer led simulations have shown that over
confidence in all aspects of life can often improve your
chances of winning.
4.50
Overconfidence 8
Faster than a speeding bullet: Usain Bolt has made a
name for himself by appearing to be over confident
before a race.
4.51
Overconfidence 8
For many years scientists have been divided over
whether overconfidence is a good or bad thing and why
it existed.
‘There hasn't been a good explanation for why we are
overconfident, and this new model offers a kind of
evolutionary logic for that. It's unlikely to be an
accident — we're perhaps overconfident for a good
reason.’
4.52
Overconfidence 8
Sprinter Usain Bolt is famed for his relaxed and
confident approach to performing, as was ‘the
greatest’ boxer Muhammad Ali.
But there is a word of warning for anyone thinks they
could be faster than a speeding bullet, more powerful
than a locomotive, or able to leap tall buildings in a
single bound.
4.53
Overconfidence 8
The Greatest: Muhammad Ali (right) coolly dodges out
of the way of Joe Frazier's lethal left hook during
their title fight in Madison Square Garden in 1971. Ali
would tell the world he was 'the greatest'.
4.54
Overconfidence 8
Positive self-delusion can also cause problems and lead
to wrong decision making, unrealistic expectations,
danger and failure.
It’s for this reason that the human tendency towards
over confidence, despite thousands of years of natural
selection, still exists. Its faulty results should have
weeded out harmful genes over generations.
4.55
Overconfidence 8
Cocky: Having too much
confidence can lead to
the wrong decisions
which researcher’s say
can lead to situations
like the Iraq war.
4.56
Overconfidence 8
Overconfidence frequently brings rewards, as long as
the spoils of conflict are sufficiently large compared
with the costs of competing for them.
In contrast, people with unbiased, accurate
perceptions usually fare worse.
The implications are that, over a long period of time,
the evolutionary principal of natural selection is likely
to have favoured a bias toward overconfidence so
someone who is abundantly confident would have more
descendants than someone rife with insecurities.
4.57
Overconfidence 8
The 2008 financial crash and the 2003 Iraq war are
just two examples of when extreme overconfidence
backfired.
‘The model shows that overconfidence can plausibly
evolve in wide range of environments, as well as the
situations in which it will fail.’
The question now is how to channel human
overconfidence so we can exploit its benefits while
avoiding occasional disasters.’
4.58
Overconfidence 8
Harbouring a mistakenly inflated belief that we can
easily meet challenges or win conflicts is actually good
for us. Researchers have shown that overconfidence
actually beats accurate assessments in a wide variety
of situations, be it sport, business or even war.
Overconfidence frequently brings rewards, as long as
spoils of conflict are sufficiently large compared with
the costs of competing for them. In contrast, people
with unbiased, accurate perceptions usually fare worse.
4.59
Overconfidence 8
The implications are that, over a long period of time
the evolutionary principal of natural selection is likely
to have favoured a bias towards overconfidence.
Therefore people with the mentality of someone like
boxer Mohammad Ali would have left more
descendants than those with the mind-set of film
maker Woody Allen.
The evolutionary model also showed that
overconfidence becomes greatest in the face of high
levels of uncertainty and risk. When we face unfamiliar
enemies or new technologies, overconfidence becomes
an even better strategy.
4.60
Overconfidence 8
"The model shows that overconfidence can plausibly
evolve in wide range of environments, as well as the
situations in which it will fail. The question now is how
to channel human overconfidence so we can exploit its
benefits while avoiding occasional disasters."
Self-delusion is a winning survival strategy, study suggests - ScienceDaily - 14
September 2011
How overconfidence can improve your chances of success - Daily Mail - 19 Sept
2011
The evolution of overconfidence
Johnson, DDP; Fowler, JH
Nature 2011 477(7364 ) 317-320 DOI: 10.1038/nature10384 Supplement
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4.61
Overconfidence 9
Why brash can be best: Overconfident people 'can fool
others into thinking they are smarter than they really
are'
• Students asked to rate own ability and that of
peers after first day of course
• Final exam marks showed some overestimated
themselves in prediction
• Found those who were overconfident were also
rated highly by others
• Experts say society often rewards self-deceivers
over most accomplished
• Also claim that overconfident people are risktakers and this could partially explain banking
collapse
4.62
Overconfidence 9
As the old saying goes - it seems nice guys really do
finish last.
Overconfident people are more likely to land the best
jobs in life as they can fool others into believing they
are more talented than they really are.
Experts behind the research also claim that successful
people who have an inflated view of their own abilities
could partially explain disasters such as the banking
collapse in 2008.
4.63
Overconfidence 9
Those with an inflated view of their own abilities are
more likely to succeed at work.
This is because these people are more likely to
overestimate other people's talents, and therefore
take greater risks.
Those who underestimate their own skills are seen as
less able than they actually are by colleagues.
There was a positive correlation between the grades
students predicted for themselves and the grades
others predicted for them.
4.64
Overconfidence 9
In other words, students who predicted higher grades
for themselves were predicted to have higher grades
by others, irrespective of their actual final score.
Overconfident people are more likely to over estimate
other people's talents and therefore take greater
risks.
The same applied to those who were under confident.
'These findings suggest that people don't always
reward the most accomplished individual but rather
the most self-deceived.
4.65
Overconfidence 9
“We think this supports an evolutionary theory of selfdeception.”
The study has linked an evolutionary preference for
overconfident people with disasters resulting from
risk-taking such as the banking collapse in 2008.
“It can be beneficial to have others believe you are
better than you are and the best way to do this is to
deceive yourself - which might be what we have
evolved to do.”
“This can cause problems as overconfident people may
also be more likely to take risks.”
4.66
Overconfidence 9
“So if too many people overrate themselves and
deceive others about their abilities within
organisations, then this could lead to disastrous
consequences such as airplane crashes or financial
collapses.”
“If overconfident people are more likely to be risk
prone then by promoting them we may be creating
institutions, such as banks and armies, that are more
vulnerable to risk.”
4.67
Overconfidence 9
Over confident people can fool others into believing
they are more talented than they actually are.
These 'self-deceived' individuals could be more likely
to get promotions and reach influential positions in
banks and other organizations. And these people are
more likely to overestimate other people's abilities and
take greater risks, possibly creating problems for
their organizations.
4.68
Overconfidence 9
The findings, find a link between a person's view of
their own ability and how others see their abilities, and
could partially explain financial collapses and other
disasters.
Self-deceived individuals deceive others better - ScienceDaily - 27 August 2014
Why brash can be best: Overconfident people 'can fool others into thinking they
are smarter than they really are' - Daily Mail - 31 Aug 2014
Self-Deceived Individuals Are Better at Deceiving Others
Lamba, S; Nityananda, V
PLOS ONE 2014 9(8) e104562 DOI: 10.1371/journal.pone.0104562
Menu
4.69
Over Confidence
Give your best guess for the value you might expect on the next day, also
give a ninety percent confidence interval for your guess.
Index
01/09/2014
02/09/2014
03/09/2014
04/09/2014
05/09/2014
06/09/2014
07/09/2014
08/09/2014
09/09/2014
10/09/2014
11/09/2014
12/09/2014
13/09/2014
14/09/2014
15/09/2014
16/09/2014
17/09/2014
18/09/2014
19/09/2014
20/09/2014
21/09/2014
22/09/2014
23/09/2014
24/09/2014
25/09/2014
26/09/2014
27/09/2014
28/09/2014
29/09/2014
Day
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
BP share price
482.7
477.3
483.75
455
466.8
468.7
466.85
471.6
472.2
470.15
468.3
472.35
471.05
471.3
473.3
469.95
466.05
464.95
451.8
451.7
456.35
BP.L Historical Prices | BP Stock - Yahoo! UK & Ireland Finance
4.70
Regression Analysis: BP share price versus Index
Predicted Values for New Observations
New Obs
1
Fit
458.82
Index
30/09/2014
SE Fit
3.32
90% CI
(453.08, 464.55)
90% PI
(445.16, 472.47)
BP share
price
453.45
4.71
Over Confidence
Give your best guess for the value you might expect on the next day, also
give a ninety percent confidence interval for your guess.
Index
01/09/2014
02/09/2014
03/09/2014
04/09/2014
05/09/2014
06/09/2014
07/09/2014
08/09/2014
09/09/2014
10/09/2014
11/09/2014
12/09/2014
13/09/2014
14/09/2014
15/09/2014
16/09/2014
17/09/2014
18/09/2014
19/09/2014
20/09/2014
21/09/2014
22/09/2014
23/09/2014
24/09/2014
25/09/2014
26/09/2014
27/09/2014
28/09/2014
29/09/2014
Day
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
US Dollar exchange rate
1.6612
1.6473
1.6463
1.632
1.6326
1.6326
1.6219
1.6095
1.6107
1.6209
1.6255
1.6274
1.6274
1.626
1.623
1.6251
1.625
1.6435
1.6288
1.6288
1.631
1.6365
1.6391
1.6331
1.6325
1.6249
1.6249
1.6235
1.6243
Exchange Rates - Compare Currency Exchange Rates
4.72
Regression Analysis: US Dollar exchange rate versus Index
Predicted Values for New Observations
New Obs
1
Fit
1.62530
Index
30/09/2014
SE Fit
0.00396
US Dollar
exchange
rate
1.6215
90% CI
(1.61856, 1.63205)
90% PI
(1.60637, 1.64424)
4.73
Over Confidence
Give your best guess for the value you might expect on the next day, also
give a ninety percent confidence interval for your guess.
Day
Mon
Tues
Temperature in Newcastle
13
13
03/09/2014
04/09/2014
05/09/2014
06/09/2014
07/09/2014
08/09/2014
09/09/2014
10/09/2014
11/09/2014
12/09/2014
13/09/2014
14/09/2014
15/09/2014
16/09/2014
17/09/2014
18/09/2014
19/09/2014
20/09/2014
21/09/2014
22/09/2014
23/09/2014
24/09/2014
25/09/2014
26/09/2014
27/09/2014
28/09/2014
29/09/2014
30/09/2014
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
17
16
16
13
12
11
13
13
13
13
13
12
14
14
14
14
14
11
9
11
13
12
13
13
12
16
14
14
Scatterplot of Temperature in Newcastle vs Index
17
16
Temperature in Newcastle
Index
01/09/2014
02/09/2014
15
14
13
12
11
10
9
8
01/09/2014 06/09/2014 11/09/2014 16/09/2014 21/09/2014 26/09/2014 01/10/2014
Index
Weather History for Newcastle Airport, United Kingdom | Weather Underground
4.74
Regression Analysis: Temperature in Newcastle versus Index
Predicted Values for New Observations
New Obs
1
Fit
12.478
SE Fit
0.639
90% CI
(11.390, 13.566)
90% PI
(9.424, 15.532)
Temperature
Index in Newcastle
30/09/2014
14
4.75
Over Confidence
Give your best guess for the value you might expect on the next day, also
give a ninety percent confidence interval for your guess.
Day
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Wed
Thur
Fri
Sat
Sun
Mon
Tues
Tesco share price
225.55
230.9
232.6
229.45
228.5
232.9
233.15
231.9
230.2
228.65
228.5
225.15
224.75
227.35
229.6
Scatterplot of Tesco share price vs Index
230
Tesco share price
Index
01/09/2014
02/09/2014
03/09/2014
04/09/2014
05/09/2014
06/09/2014
07/09/2014
08/09/2014
09/09/2014
10/09/2014
11/09/2014
12/09/2014
13/09/2014
14/09/2014
15/09/2014
16/09/2014
17/09/2014
18/09/2014
19/09/2014
20/09/2014
21/09/2014
22/09/2014
23/09/2014
24/09/2014
25/09/2014
26/09/2014
27/09/2014
28/09/2014
29/09/2014
30/09/2014
220
210
200
190
203
194.5
194.9
192.5
191.55
01/09/2014 06/09/2014 11/09/2014 16/09/2014 21/09/2014 26/09/2014 01/10/2014
Index
187.8
186.2
TSCO.L Historical Prices | TESCO PLC Stock - Yahoo! UK & Ireland Finance
Why!
Tesco reveals it overstated first-half results by £250m - FT - 22 September 2014
4.76
Regression Analysis: Tesco share price versus Index
Predicted Values for New Observations
New Obs
1
Fit
194.09
Index
30/09/2014
SE Fit
4.46
Tesco
share
price
186.2
90% CI
(186.39, 201.80)
90% PI
(175.74, 212.45)
4.77
Are Graphs The Answer
Consumers' welfare largely depends on the soundness of their financial
decisions. To this effect, the present research examines how people
process graphical displays of financial information (e.g., stock-prices) to
forecast future trends and invest accordingly. In essence, we ask whether
and how visual biases in data interpretation impact financial decision-making
and risk-taking. Five experiments find that the last trading day(s) of a
stock bear a disproportionately (and unduly) high importance on investment
behavior, a phenomenon we coin end-anchoring. Specifically, a stock-price
closing upward (downward) fosters upward (downward) forecasts for
tomorrow and, accordingly, more (less) investing in the present. Substantial
investment asymmetries (up to 75%) emerge even as stock-price
distributions were generated randomly to simulate times when the market
conjuncture is hesitant and no real upward or downward trend can be
identified. Allying experimental manipulations to eye-tracking technology,
the present research begins to explore the underpinnings of end-anchoring.
Duclos, R. “The psychology of investment behavior: (De)biasing financial
decision-making one graph at a time” Journal of Consumer Psychology 2015
25(2) 317–325 DOI: 10.1016/j.jcps.2014.11.005
Menu
4.78
Overconfidence - Self-Test Of
Overconfidence
Just for fun, from a recent quiz
show, “Eggheads” or was it “The
Chase”.
Which would you cook on a skewer?
A. Souvlaki
B. Dolmades
C. Moussaka
4.79
Overconfidence - Self-Test Of
Overconfidence
C
C
C
A. Souvlaki
C
C
C
C
B.C Dolmades
C
C
C
C
C.C Moussaka
C
C
c
4.80
Overconfidence - Self-Test Of
Overconfidence
90% Confidence Range
Low
1.
How long is the M1?
2.
What is the diameter of the London Eye?
3.
In what year was the construction of London Bridge completed?
4.
How tall is Mount Snowdon?
5.
How long is the River Thames?
6.
In what year did Newcastle University become independent from the
University of Durham?
7.
How tall is the Elizabeth Tower (Palace of Westminster)?
8.
What is the rail distance from London to Edinburgh?
9.
In what year was Queen Victoria born?
10.
In what year was the School of Medicine and Surgery established in
Newcastle?
High
Keep a note of
your intervals
4.81
Overconfidence - Self-Test Of
Overconfidence
This test will give you some idea of whether you are
overconfident on general knowledge questions.
82
Overconfidence - Self-Test Of
Overconfidence
F
True Value
f
1.
How long is the M1?
193 miles / 311 km
2.
What is the diameter of the London Eye?
394 ft /120 m
3.
In what year was the construction of London Bridge completed?
1894
4.
How tall is Mount Snowdon?
3560 ft / 1085 m
5.
How long is the River Thames?
215 miles / 346 km
6.
In what year did Newcastle University become independent from the
University of Durham?
1963
7.
How tall is the Elizabeth Tower (Palace of Westminster)?
315 ft /96 m
8.
What is the rail distance from London to Edinburgh?
393 miles / 633 km
9.
In what year was Queen Victoria born?
1819 (24 May)
10.
In what year was the School of Medicine and Surgery established in
Newcastle?
1834
Menu
Is the
answer in
your
interval?
Nine of
them
should be!
9.83
83
83