Overconfidence and Illusion of Control

How much do you think you know? • Conviction is blinding: It is easy to forget one’s fallibility (in Judgment). O “Convictions are more dangerous enemies of Ruth than lies. ” F.

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Nietzsche • Be cautious when someone else seems very confident. Their confidence may not mean much… • Overconfidence has its costs. O E. G. , underestimated risk, missed deadlines, overrun budgets, overpaid acquisitions, excessive trading Decide prudently but act boldly: o Be realistic when making predictions and decisions. O Be confident when implementing your decisions and trying to convince others. Cognitive dissonance • We feel psychologically uncomfortable when facing facts that are contrary to our existing knowledge, beliefs, habits, and tastes.

To decrease dissonance, we come up with ad hoc rationalizations to save cherished ideas – by distorting new evidence – or rejecting it outright. • We are motivated not so much to be right. Instead, we are motivated to believe we are right. Competitor neglect • When considering market-entry decisions people pay disproportionate attention to their own internal characteristics and little to those of competitors or the external market in general.

Illusion of control Ђў We tend to exaggerate the degree of control we have over events, discounting the role of chance. Remedies for Overconfidence

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