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Overconfidence Bias: What It Is and How to Overcome It
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Overconfidence bias
Most people think they know more than they really do.
Researchers showed that people believe they understand familiar manufactured objects much better than they really do. For instance, if you think you understand how a can opener works, try to draw a diagram of a can opener on a piece of paper. If you can't draw, write out a detailed explanation. Then, find out how it really works.
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The details that form our reality
When we don't understand the details, it can cause much trouble. If a nation is overconfident that they will win a war, they will fight more wars. An investor that is to sure of their estimate of an asset's value will trade too much.
The world is too big to process and understand everything. We have to oversimplify the world to be able to function in it. The difficulty is that we don't think our models of how the world works are oversimplified. We believe they are correct. This creates a hidden risk.
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The hidden risk of not understanding the details of our reality
Focusing on specific details in a complex system while ignoring the amount of detail contained within the system may at first show a benefit. However, it can create a massive collapse in the long-run.
In the late 18th century, the German government wanted to grow "scientific forests" to track and harvest timber. Underbrush was cleared, and tree species reduced. The first planting did well because of nutrients that were still left in the soil. But the clearing of underbrush reduced insect, mammal, and bird populations essential to soil building. Pests had few enemies left and infected the entire forest, resulting in massive forest death across the country.
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Managing the overconfidence bias
- Embrace meta-rationality. Know the limits of your own understanding, know when to consult experts, which experts to defer to, and when to admit that something is impossible for anyone to know.
- Allow for uncertainty. Confident statements seem more promising but are open to hidden risks.
- Seek fingerspitzengefühl, roughly translated as intuitive knowledge. We all have some areas where we have a deep knowledge. We have to learn not to overestimate our own knowledge. To avoid overconfidence bias, learn more about your field of expertise.
- Build in a margin of safety. When an engineer designs a bridge that can support up to 100 cars at a time, they plan to hold a multiple of that amount, 200 or 300, as a margin of safety.
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Cognitive Bias
Cognitive Bias is a predictable pattern of mental errors where we misperceive reality and move away from the most likely way of reaching our goals.
These mental blind spots...
Unconscious Bias
Unconscious bias refers to unconscious forms of discrimination and stereotyping. Unconscious bias often leads to discrimination, be it deliberate or unintentional.
Unconscious bias is different from cognitive biases. Cognitive biases relate to our brains' particular wiring, while unconscious bias refers to perceptions between different groups and are specific to different societies.
How to Reduce Unconscious Bias
- Recognise that the unconscious bias is a systemic issue. Internal cultures need to be checked and addressed first.
- There is no shame or guilt in unconscious bias. Unconscious bias stems from our tendency to categorise people into social groups and often doesn't match our conscious values.
- It takes a series of conversations and interventions to prevent and protect against unconscious bias.
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The curse of knowledge
... is a cognitive bias that causes people to fail to account for the fact that others don’t know the same things that they do.
Why we experience the curse of knowledge
Since we spend the majority of the time experiencing things from our own perspective, we struggle to imagine the perspective of others.
The curse of knowledge is a cognitive bias that makes it difficult for people to account for the fact that other people’s thoughts, beliefs, and views are different from their own.
Minimize the curse of knowledge
You need to be conscious of the fact that people have different levels of knowledge than you.
- Ask for feedback from the people you are communicating with, in order to confirm that they understand what you are saying.
- Make sure that you explain the technical terms and concepts that you use as you are using it.
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Early memories are not reliable
Scientists believe that it is impossible to recall the first few years of life. Many of the necessary brain structures for memory have not yet matured at the time. It means that it is physiological...
Your memory depends on context
If we learn facts while we are doing something, we will be able to recall them better, when we are doing that same thing again.
You can use this information to your advantage: for instance, try chewing a particular gum while studying.
Your mental timeline is skewed
Research has shown that we often underestimate the amount of time that has passed from long ago, and overestimate the amount of time that has passed since more recent events.