Overconfidence Not Such A Bad Thing A new research study finds that faulty beliefs can sometimes prove beneficial.

Investigators discovered that in some situations, overconfidence in the ability to meet challenges or win conflicts can be a good thing.

Investigators determined that overconfidence actually beats accurate assessments in a wide variety of situations, be it sport, business or even war.

However, this aggressive perspective can lead to significant failures or wrong decisions. In the study, the authors cite the 2008 financial crash and the 2003 Iraq war as just two examples of when extreme overconfidence backfired.

Researchers from the University of Edinburgh and the University of California, San Diego used a mathematical model to simulate the effects of overconfidence over generations. The model pitted overconfident, accurate, and underconfident strategies against each other.

Investigators determined that overconfidence frequently brings rewards — as long as the rewards associated with the conflict are sufficiently large compared with the costs of competing for them.

In contrast, people with unbiased, accurate perceptions usually fare worse.

The findings support a view that over a long period of time the evolutionary principle of natural selection is likely to have favored a bias towards overconfidence. People with a bullish mentality presumably would have left more descendants than those with more of a reserved perspective.

The evolutionary model also showed that overconfidence becomes greatest in the face of high levels of uncertainty and risk. When we face unfamiliar enemies or new technologies, overconfidence becomes an even better strategy.

“The model shows that overconfidence can plausibly evolve in a wide range of environments, as well as the situations in which it will fail. The question now is how to channel human overconfidence so we can exploit its benefits while avoiding occasional disasters,” said researcher Dominic Johnson, Ph.D.

The study is published in the journal Nature.

Source: University of Edinburgh