The Story of Overconfidence


Amos Tversky, a mathematical psychologist, and Daniel Kahneman, a psychologist, and economist, did seminal work on how we make choices. Before their work, psychologists mostly came up with stories on human behavior that had scant experimental basis. On the other hand, economists held rigidly to the belief that humans nearly always make rational, calculated decisions to maximize their utility.

There are many types of biases. Kahneman provides an example of a particularly dangerous  bias in his book “Thinking Fast and Slow” – Overconfidence. This occurs, he wrote, because “when we estimate a quantity, we rely on information that comes to mind and construct a story. Allowing for the information that does not come to mind is impossible.”

Kahneman writes that “Overconfidence also appears to be endemic in medicine. A study of patients who died in the ICU compared autopsy results with the diagnosis that physicians had provided while the patients were alive. Clinicians who were ‘completely certain’ of the diagnosis were wrong 40% of the time.”

In business, when one honestly acknowledges that one is not sure and that there is uncertainty inherent in one’s advice, clients often look elsewhere for an “expert” who will confidently give them a “solution.” When events turn out differently, there are always a number of reasons why the outcome differed from what the expert predicted. 

Desert Island Decisions

Of interest in this brief essay is what I call the Desert Island Decision Process. Imagine you are told that you will be stranded on an uninhabited desert island. The island is not dangerous, and food and shelter are easily available. You can take one person with you. The person can be selected from the past (and magically brought to life) or present. Who would you choose?

I asked the question to a few of my contacts. A flavor of some of the answers were: historical figures, spouses, children, and parents. One person said they preferred to be alone. However, the primary reason for my questioning was not the answers per se but to try and discern if there was an attempt to list out criteria or whether answers came “from the gut” and to see how sure people were in the answers they gave. 

I did not give the people much time to answer, so perhaps I inadvertently “pushed” people towards answering “without thought.” But, after each one answered, I then asked, “are you sure? You can pick anyone from all of history.” Only two of the twenty-five I asked were a little unsure before answering. The others were quick and certain in their response. They were adamant that they had responded well and that the person they selected (only one chose to be alone) was the best person for them to have with them on a desert island.

There may be many errors in my approach. However, what I probably saw is that people answered using what Kahneman describes as our System 1 process. System 1 and System 2 are metaphors Kahneman uses to describe two modes of thinking and reacting to situations:

“System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control.

System 2 allocates attention to the effortful mental activities… including complex computations.”

In answering with System 1 most of the people were confident their choice was right for them. This, even though none of them tried to layout criteria or analyze what might make them happy with a certain type of companion on this desert island.

Important Decisions for Your Ten Year Older Self

Kahneman quotes the comedian Danny Kane who “speaking of a woman he disliked, said, ‘Her favorite position is beside herself, and her favorite sport is jumping to conclusions.’ [This] offers an apt description of how System 1 functions. Doubt is not in the repertoire of System 1. Uncertainty and doubt are the domain of System 2.”

We are, writes Kahneman, a “machine for jumping to conclusions,” and having decided on a certain path, we are then usually supremely sure of ourselves.

Making better decisions is not just a matter for governments and business purposes. It is vital for our own personal well-being. Are the decisions you make today the right ones for your ten-year older self. If you look back on your life and see the major, life-affecting decisions, your ten-year younger self took, were they wise? Did your ten-year younger self examine all the options, and was this younger self aware of the person you might have turned out as? 

Living with Uncertainty

Theocrats and ideologues are always so sure. Many are also willing to do the ultimate harm to others and themselves for a “cause.” This often goes beyond the mere bias of overconfidence, and I can only imagine it as a disease of the mind. 

Those with a scientific-humanist bent of mind identify with what Oliver Cromwell wrote to the General Assembly of the Church of Scotland: “I beseech you, in the bowels of Christ, think it possible that you may be mistaken.”

When faced with a major decision, I now ask myself Oliver Cromwell’s question. I then attempt to reason out carefully alternatives before proceeding to take action (or not take any action). Perhaps, dear reader, you might find such an approach useful as well.

© Kaikhushru Taraporevala

Share This :

4 Replies to “The Story of Overconfidence”

  1. I’ve been browsing on-line more than three hours nowadays, yet I never found any fascinating article like yours. It抯 lovely price enough for me. Personally, if all web owners and bloggers made just right content as you probably did, the net will be a lot more useful than ever before.

  2. Great ?I should certainly pronounce, impressed with your web site. I had no trouble navigating through all the tabs and related info ended up being truly simple to do to access. I recently found what I hoped for before you know it in the least. Quite unusual. Is likely to appreciate it for those who add forums or something, website theme . a tones way for your client to communicate. Excellent task..

  3. Unquestionably believe that which you stated. Your favorite reason appeared to be on the net the easiest thing to be aware of. I say to you, I definitely get irked while people consider worries that they plainly don’t know about. You managed to hit the nail upon the top and also defined out the whole thing without having side-effects , people could take a signal. Will probably be back to get more. Thanks

  4. Today, considering the fast life style that everyone leads, credit cards have a big demand throughout the market. Persons from every arena are using the credit card and people who aren’t using the credit cards have prepared to apply for even one. Thanks for revealing your ideas in credit cards.

Leave a Reply

Your email address will not be published. Required fields are marked *