The title of the post may suggest I have drifted to biology etc. But actually overconfidence is one of the central issues in behavioral economics.
The central idea is whenever you pose questions to people which is based on subjective probability, you will find people are really overconfident. For instance, suppose you ask all mutual fund managers how confident they are they will beat the benchmark index, you will get answers nearing 100%. And you know that can’t be true as only few fund managers will be able to do it. One can understand that their job is based on the assumption that they will be able to beat the index, but still they should be aware of reality as well
Now, one may ask how does this matter? Well, it matters as people take decisions based on overconfidence and mess up outcomes. For instance in the case of fund managers they will end up taking higher risks.
Coming back to the title of the post, you keep coming across these various television serials based on epics like Ramayana, Mahabharata on various TV channels. The versions are redone every now and then. Then there are separate serials on individual characters like Lord Krishna, Ravana etc.
I come across one common thing- all are so overcnfident about their abilities in physical strength and warfare. Most characters have received blessings from different Gods and based on these blessings, believe no one can harm them. Most are also aware that there is one thing that can cause their/them death/harm but discount its happening substantially (black-swan anyone!!).
So, I would guess overconfidence is in our genes and will continue to muddle our decision making.
I misssed pointing to some research on overconfidence. There is plenty:
- This paper discusses overconfidence in details
- Overconfident CEOs
- Overcofidence in spreadsheets
- Economists themselves are overonfident!!