Managing Overconfidence

control

Who can forget Dr. Ellie Sattler’s poignant retort to John Hammond in Jurassic Park?  “You never had control, that’s the illusion!”

A classic example of a judgment bias with disastrous effects.  The technological advancement of creating dinosaurs from DNA led Hammond to overconfidently believe he was in creative control and set the stage for failures of epic proportions. Overconfidence often results in poor decisions, perhaps not with T-Rex eating consequences, but loss producing judgments nonetheless. Managing overconfidence is an important part of decision making.

The field of decision making and behavioral economics study cognitive biases such as irrational escalation, loss aversion (see my past blog on loss aversion), confirmation bias, anchoring, availability heuristic and many more error causing predispositions including the overconfidence effect.

Overconfidence effect is excessive confidence in one’s answer or abilities over real accuracy. Overconfidence leads to underestimated risks and leaves one open for errors in judgments.  Some common causes of overconfidence are:

  • Illusion of control. Overestimating the amount of control one has over outcomes that are not subject to influence or control.  I would love to throw in Dr. Sattler and Dr. Ian Malcolm’s banter (ok, I will): Dr. Ian Malcolm says, “God creates dinosaurs. God destroys dinosaurs. God creates man. Man destroys God. Man creates dinosaurs.”  To which Dr. Ellie Sattler trumps, “Dinosaurs eat man. Woman inherits the earth.”  What really fits, though, is mathematician Dr. Ian Malcolm’s argument against Hammond’s illusion of control bias, “Yeah, yeah, but your scientists were so preoccupied with whether or not they could that they didn’t stop to think if they should.” Yes, Malcolm was right; the Velociraptors did not care that Hammond created them.
  • Availability. Failing to envision all the possible outcomes so we limit ourselves to ‘available’ options. Also known as the availability bias.  Frog DNA became the unimaginable solution Dr. Grant found.
  • Anchoring one option over others and giving it more weight.
  • Confirmation bias where we seek confirmation data instead of disproving evidence. This also includes when we persuade others to like our idea.
  • Hindsight makes us think things are more predictable than they are and results in overconfident heuristics and potential judgment errors, as well as Jurassic Park the Lost World, Jurassic Park III and Jurassic World.

Beyond these psychological cognitive bias, there can also be biochemical causes such as euphoria (Alcohol causes bad decisions – See my Don’t be Bridget! blog) and overconfidence common to group judgments.

Don’t fret.  Most people’s decisions are distorted by overconfidence. Luckily, overconfidence can be recognized and managed. Metaknowledge – or understanding the limits of our primary knowledge – can reduce our overconfidence errors by demonstrating our limits of knowledge and, more importantly, the limits of our statistical confidence (Don’t worry, I’m a recovered engineer and I am not going to bore you with regression analysis or probability ranges.)

So how do you improve your metaknowledge? How do you determine how little you really know? Feedback and accountability improves your level of metaknowledge.

Here are 6 Cures for overconfidence bias:

  1. Awareness. Being aware that overconfidence may skew judgments is the first step in improving metaknowledge.
  2. Seek feedback. Obtaining and addressing the quality of past decisions will help correct future overconfidence and overestimation errors.
  3. Counterarguments. Play Devil’s Advocate and look for disaffirming points. Be Dr. Ian Malcolm!
  4. Alternatives.  Run rabbit holes to dead ends to explore all options.
  5. Scenarios. Trouble shoot all the ‘what if’ questions.  Ask questions and collect information.
  6. DATA!  Collect and analyze data. Data doesn’t lie.  However, avoid applying causal relationships that may not exist.

 

Don’t get blindsided.

If you like my writing here, please check out my blog CorporateCulturology.com. I welcome your comments and advice for future topics.

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