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The following contradiction is pasted from the British actuarial notes: (hopefully within the terms of fair use) "Overconfidence People tend to overestimate t
by riskneural 11y ago
The following contradiction is pasted from the British actuarial notes: (hopefully within the terms of fair use)
"Overconfidence
People tend to overestimate their own abilities, knowledge and skills. For example, if you ask 100 people if they are better than average drivers, then you might not be surprised if more than 50% of them reply “yes”!
Moreover, studies show that the discrepancy between accuracy and overconfidence increases (in all but the simplest tasks) as the respondent is more knowledgeable! (Accuracy increases to a modest degree but confidence increases to a much larger degree. ) If this is true then it may not be wise to pass the Subject ST5 exam!
Overconfidence could therefore be a potentially serious problem in fields such as investment where most of the participants are likely to be highly knowledgeable.
Moreover, the available evidence suggests that even when people are aware that they are overconfident they remain so."
- visakanv 11y ago> People tend to overestimate their own abilities, knowledge and skills. For example, if you ask 100 people if they are better than average drivers, then you might not be surprised if more than 50% of them reply “yes”! Also people don't actually need to think they're great drivers to think this– there's a selection bias at play. We remember every single time some other driver almost killed us, far more than we notice when people are driving nice and smooth.
- tremon 11y agoIt's also a bad example. "A better driver" is a subjective term and may mean different things to different people. In fact, I would be surprised if fewer than 60% of drivers were in the top 50% when measured objectively on their own criteria.
- krkoch 11y ago> if you ask 100 people if they are better than average drivers, then you might not be surprised if more than 50% of them reply “yes”! Isn't it fully possible that most people are better than the average? Most people e.g. have more arms than average.
- refurb 11y agoExactly. If you had a very low outlier, you could easily have >75% smarter than average and it would be accurate.
- riskneural 11y agoThe arms distribution is an unusual example of a left skewed distribution. Mostly we are thinking of right skewed distributions, where there are lots of observations humped up towards zero, and then they spread out towards infinity, or symmetrical distributions. In the latter two cases the average would be above or equal to the median, so most people would be worse than or equal to the average.