Overconfidence

Concept/Term:

The overconfidence effect refers to the human tendency to be more confident in one's behaviors and physical characteristics than one should be. Overconfidence is most likely witnessed after a series of "successes" and can lead to excessive risk taking. Because individuals think they have become informed, they are more confident in their beliefs. In that sense, individuals may be confident to improve success rates, even though the confidence levels are still reflecting unfounded certainty. This is sometimes used to explain why most investors have problems when investing.

Example:

Flying a small single-engine airplane may look easy to do when someone observes a skilled pilot. He or she relates it to driving a car. Seeing this and saying, "I could do that; it's easy," is being over confident when you have never flown before and have unfounded certainty.