Confidence is key! – But can you always trust confidence?

Written By: Rebecca Perrott

From a young age we are taught to be confident, helping us get out of our comfort zones and experience new things. “Fake it till you make it”, they said. The key to success is rooted in confidence. Which is true to a certain extent, but our confidence can also be deceiving.

Confidence is the feeling or belief that instils faith or reliability in someone or something. It is a quality we use to assign certainty to our abilities, self-awareness as well as trust. Thus, confidence is an important factor in decision making and risk assessment as well as a measure of success throughout our lives. From business, sport, relationships and everyday tasks to recreational activities such as betting we need confidence. However it’s important to keep everything in moderation, as sometimes overconfidence can be detrimental to our decision making and risk assessment.

The Biology Behind Overconfidence

Metacognition is defined as the ability to think about and monitor our own cognitive processes. Metacognitive ability, in other words, our ability to accurately evaluate our performance or progress, varies from person to person. In general people are seen to be too confident in their decision making. Behavioural analyses have identified that lowered metacognitive ability leads to increased confidence levels. Poor metacognitive ability and overconfidence can lead to poor decision making and dire consequences. A study by Molenberghs et al. assessed the relationship between metacognitive ability and overconfidence using fMRI (Functional magnetic resonance imaging). Results indicated that people tend to overestimate their confidence in order to feel more positive. This indicates an implication on behavioural performance. But what effect does this have on our daily decision making?

Overconfidence bias and decision making

Human decision making is subject to numerous biases and heuristics which ultimately impact our decisions. Overconfidence is a highly susceptible cognitive bias which describes the tendency people have to overestimate their abilities, as well as the likelihood and rate of success. In other words, a tendency for an individual(s) to overestimate the precision of available information. This misleading estimation of skills, talent or intellect can often distort decision making due to the belief that we are better than we are (afterall, we are all pretty cool). This bias allows us to ignore obvious and important information such as risk whilst remaining confident in our decisions.

Here is an example of how varying levels of confidence shape our decisions and lead to bias. As a novice to mountain biking, you lack confidence in your mountain biking ability thus proceed to be cautious when approaching rocky terrain. However, as a confident road cyclist, you are less cautious and used to owning the road and riding alongside cars. Despite your ability and talent, busy roads can be dangerous. Could this high level of confidence lead to poor decision making and judgement? Overconfidence allows us to feel certain of our choices despite the risk level thus it is important to pay attention to this bias.

Regardless of how great we think we are, from the average joe to the expert, we often fall victim to overconfidence… Let’s take a look at how we may succumb to this bias by identifying the three types of overconfidence.

Types of overconfidence

1. Overestimation

The first type of overconfidence is an overestimation. This refers to situations in which an individual overestimates their ability.

2. Over-placement or better-than-average

Over placement alludes to the belief that an individual is better than the average, over-placing one’s ability.

3. Over-precision

Over-precision refers to when confidence is expressed through numbers and unrealistic percentages or statistics or the excessive belief that you know the truth.

Our confidence can be influenced by numerous factors such as relationships, time and other physical elements etc. Despite our superhero, can-do attitude, due to overconfidence our decisions may not always result in a ‘saved the day’ happy ending. So, where do we see different types of overconfidence in action? Some examples are driving, sports betting and time.

Driving

Driving requires that we make a number of clear and confident decisions especially when overtaking, turning a corner and following the rules of the road etc. to ensure all drivers, passengers and pedestrians are safe. Hesitation whilst driving increases the risk of an accident occurring thus drivers need to be confident in their decisions. Driving confidence levels change depending on the experience level of the driver. Learner drivers typically overestimate their ability, however experienced drivers often underestimate their ability but believe they are better than other drivers. This is an example of over-placement or better-than-average overconfidence, over-placing one’s ability. Another example of overconfidence when driving pertains to overestimation. Drinking and driving is an example of overconfidence bias where one overestimates their ability to drive thus ignoring the effects of alcohol such as slower reaction time.

Why do we drink and drive? Often the response is “I have only had one drink” or “I have done this before so we will be fine”.

Driving under the influence is dangerous for not only the driver but also all those surrounding them, be it passengers, pedestrians or other drivers. However, many fall victim to overconfidence bias and drive under the influence. Through the understanding of this bias marketers have been able to promote awareness around how confidence can impact decision making. Campaigns such as the Heineken 0.00 “When you drive, Never drink.” Campaign https://www.youtube.com/watch?v=ingyb0KLxDk is a perfect example of this. The Heineken 0.00 campaign aims to promote responsible drinking and deter driving under the influence. Heineken’s research on what triggers drinking and driving found that overconfidence in driving ability was a key factor. The campaign uses Formula One drivers Keke and Nico Rosberg to instill the message that, regardless of ability or confidence in your ability, everyone should abstain from drinking alcohol when driving, even if you’re considered to be one of the top 20 drivers in the world.

Sports betting

With numerous statistics on offer, tips and a number of other factors to be considered when placing a bet, sports betting is the perfect opportunity for over precision to occur. Over precision occurs when we make a statement or claim without any supporting evidence or when we express confidence through unrealistic percentages and statistics. Here’s an example, you have just placed a margin bet for the Super Rugby tournament on the Hurricanes vs Reds game. You’ve bet your money on the hurricanes with a +13.5 handicap. The Reds are the fan favourite and the Hurricanes are the underdogs. In order for you to win this bet The Hurricanes will have to either win the game or lose it by less than 13 points. If the Reds win by 14 points or more the bet is lost. But you’ve been told that The Hurricanes have this in the bag. You are new to sports betting, and amongst the hype and confusing jargon can’t seem to remember where you got your tip from, which ultimately influenced your decision to back the underdogs. As a novice in the sports betting world, relying on tips is risky especially when the tip comes from an unknown or unreliable source. This overconfidence in an unknown tip could result in a loss, but because you’re under the influence of a bias you’re unable to assess the risk correctly.

Time

This is probably the most relevant example for just about anybody. We’re all too familiar with the concept of time management. Deadlines, meetings, birthday parties or even preparing a meal all involve the management of time. Often we are overly confident in our time management, overestimating our ability to complete tasks on time or through over-precision, not allocating a realistic amount of time to reach a specific goal or destination. For example, a project at work is due in five days but you allocate two days to complete the task, completely underestimating the scope of the project and overestimating your ability to get the work done, so you end up missing your deadline. South Africans are most famous for the next example. The phrases ‘now now’ and ‘just now’ are entrenched into South African culture. An example of over-precision is at a braai.We’ve all heard the famous last words: “We are going to start the braai “now, now” or “just now”. Suddenly it’s almost 10pm and dinner is either nowhere near ready or burnt to a crisp. While everyone loves a social dinner, allowing enough time for the fire to cool is necessary for a well cooked meal.

It is evident that we may be overconfident in our decision from small to big tasks. So how do we combat the overconfidence bias? By being aware of your overconfidence, considering consequences and alternatives as well as reflecting on your decisions you can prevent your decision making being affected by the overconfidence bias. More importantly, you can start the braai on time.

References

Bias, B., Hilton, D., Mazurier, K., and Pouget, S. 2005. Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market . The Review of Economic Studies, Volume 72, Issue 2, Pages 287–312. doi: doi./10.1111/j.1467-937X.2005.00333.x

Čuláková, T., Kotrus, P., Uhlířová, A., and Jirásek, m. (2017). The overconfidence bias and ceo: a literature overview. Trendy v podnikání - Business Trends, vol.7, no. 2, p. 3-9

Heineken® unveils new “When You Drive, Never Drink” campaign featuring two Formula 1 World Champions. 2020. Available: https://www.theheinekencompany.com/newsroom/heineken-unveils-new-when-you-drive-never-drink-campaign-featuring-two-formula-1-world-champions/.

Hoffrage, U. (2016). Overconfidence. In R. F. Pohl (Ed.), Cognitive illusions: 2 Intriguing phenomena in thinking, judgement, and memory (2nd edition) (pp. 2913 314). Hove, UK: Psychology Press.

Molenberghs, P., Trautwein, F., Bockler, A., Singer, T. and Kanske, P. 2016. Neural correlates of metacognitive ability and of feeling confident: a large-scale fMRI study. Soc Cogn Affect Neurosci.11(12): 1942–1951.doi: 10.1093/scan/nsw093

Moore, D. and Healy, P. 2007. The Trouble with Overconfidence.

Moore, D. and Schatz, D. 2017. The Three Faces of Overconfidence.

Moore, D. A., Tenney, E. R., & Haran, U. (in press). Overprecision in judgment. In G. Wu and G. Keren (Eds.), Handbook of Judgment and Decision Making. New York: Wiley

Sanchez, C. and Dunning, D. 2018. Overconfidence Among Beginners: Is a Little Learning a Dangerous Thing?. Journal of Personality and Social Psychology 2018, Vol. 114, No. 1, 10–28. doi:10.1037/pspa0000102

Tabassum , R. and Iqbal, H. 2015. Impact of Overconfidence, Illusion of control, Self Control and Optimism Bias on Investors Decision Making; Evidence from Developing Markets. Research Journal of Finance and Accounting Vol.6, No.11. www.iiste.org ISSN 2222-2847 (Online)