Overconfidence Bias: When We Overestimate Our Own Abilities

Overconfidence Bias: When We Have too Much Trust in Ourselves - Fallacy in Logic

As humans, being confident comes naturally to us; we all want to believe we are capable, intelligent, and knowledgeable individuals.

Oftentimes, however, this tendency gives rise to overconfidence — overestimation of one’s own capabilities. In psychology, this phenomenon is also known as the overconfidence bias.

In this article, we will explain what this bias exactly is and when it most affects us.

What is the Overconfidence Bias?

Overconfidence bias is a cognitive bias whereby a person has unreasonable confidence in their own abilities, including intellect, skills, and knowledge. In essence, it’s the difference between what people perceive their level of competence to be and what it actually is.

For example, according to one well-known study1, 93% of Americans believe that they possess above-average driving skills. This illustrates the bias well: without the overconfidence effect, no more than 50% of drivers should rank themselves above the median.

Its consequences can be detrimental because it easily leads us to venture beyond the boundaries of our abilities — whether in driving, investing, or entrepreneurship — and take on excessive amounts of risk.

And what’s behind it? It’s caused by cognitive, social, and emotional influences alike. We are indeed biased towards seeing ourselves in a more positive light, but the effect may also be inflated by our previous successes or various social incentives.

Furthermore, not everyone is as vulnerable to it as others. As Rolf Dobelli writes in The Art of Thinking Clearly:

No surprise to some readers: overconfidence is more pronounced in men — women tend not to overestimate their knowledge and abilities as much. Even more troubling: optimists are not the only victims of overconfidence. Even self-proclaimed pessimists overrate themselves — just less extremely.


Here are a few situations where the overconfidence bias commonly sways people’s judgment.


As already seen above, one of the most frequent ways it presents itself is when people are required to self-assess their abilities. Besides driving, this applies to a variety of domains and contexts. For example:

  • 65% of Americans (70 percent of men and 60 percent of women) believe themselves to have above-average intelligence2.
  • 87% of MBA students think their academic performance is better-than-average3.

The average individual is clearly skewed towards rating themselves too highly. This is true, in particular, when the genuine level of one’s competence is ambiguous to the person — when they lack concrete evidence to show what the level really is.


More often than not, the overconfidence bias is also present in forecasts. This is mainly due to having a false sense of one’s capabilities in making estimations about the future, but is also driven by our tendency to assign a higher probability on events we view as desirable and wish to take place.

For example, it’s notoriously hard to predict where the stock market is going at any given time. Yet, time and again a large number of economists and other market pundits claim to know exactly what’s going to happen, only to be proven wrong later on.

It’s interesting to note that, in one study surveying fund managers4, it was found that around 74% of professional fund managers believe they are better at their job than the average manager. On the other hand, only 23% of all active funds perform better than passively managed funds5.

Furthermore, construction is also rife with examples of overly optimistic forecasts. A textbook case is the construction of the Sydney opera house. Initially, it was estimated that it would take 4 years to build and cost AU$7 million. As it turned out, this was far from reality: it took 14 years with a final price tag of AU$102 million.

Social Incentives

In certain fields, overconfidence may even be essential for getting ahead; it’s rewarded and reinforced by social incentives.

Politics is the most obvious example. Oftentimes, candidates are largely judged based on their confidence — how certain they appear to be in their ability to get the promised outcome — not on any concrete results. In such an environment, individuals with the deepest convictions tend to have a clear advantage over their less-assured peers.

The medical field is also influenced by this; doctors who show uncertainty run the risk of appearing less competent than their colleagues. Daniel Kahneman, the Nobel-prize winning economist and a psychologist, explained this well in his best-selling book Thinking, Fast and Slow:

Generally, it is considered a weakness and a sign of vulnerability for clinicians to appear unsure. Confidence is valued over uncertainty and there is a prevailing censure against disclosing uncertainty to patients.

Experts who acknowledge the full extent of their ignorance may expect to be replaced by more confident competitors, who are better able to gain the trust of the clients.