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I imagine that the optimal level of confidence would require us to over-estimate. What possible advantage could one gain by being very realistic about one's own

I imagine that the optimal level of confidence would require us to over-estimate. What possible advantage could one gain by being very realistic about one's own skills? In a zero-sum game of two equally capable players, will over-estimation of skills enable a beneficially higher appetite for risk and exploration? Of two independently tested players with one's "IQ" higher than the other, will the "dumb" one calibrate his skill level improperly after the same amount of exposure in a game where a player is pitted against AI with different skill levels? It seems to me that people who spend more time validating their smarts or questioning it more would naturally arrive at more fine grained understanding of their ability. Also, what does the inter-country variation suggest? http://www.google.com/trends?q=am+i+smart%2C+am+i+dumb&ctab=0&geo=all&date=all&sort=0 http://www.google.com/trends?q=am+i+smart%2C+am+i+dumb&c... That may mean nothing, but google trend speculation is fun :)

lutorm 18y ago
You think higher appetite for risk is universally beneficial? I'd submit that the current economic situation shows otherwise. I see nothing beneficial if your overconfidence causes you to incorrectly estimate your risk exposure.
- ChaitanyaSai 18y ago
  I think that there is an optimal appetite for risk. Probably higher than what results in repeated reality checks, but lower than what results in exuberance bubbles. We do tend to calibrate our risk appetites depending on events [1], but there is a baseline around which this level fluctuates. It is a separately interesting issue if overconfidence is merely a scaling factor in the current scenario when it wasn't risk being underestimated in the model, but the model itself being utterly flawed. [1] http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303 http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303
skmurphy 18y ago
Realism about your own skills, if coupled with realism about others' skills, might encourage you to build a stronger team earlier. The point of the article is that "you should listen to those you disagree with instead of writing them off as idiots." Overestimating your own abilities makes it less likely you will listen.
- ChaitanyaSai 18y ago
  True, but you could also talk about aggregate skill estimation of a team as a whole, and what they should do when another team (or the stock market) disagrees with them. Realism would be nice to arrive at, but say I hope to build a better mousetrap. How do I realistically estimate my chances in this endeavor?
  - skmurphy 18y ago
    Another team is different from the stock market. In an economic competition you have a number of opportunities to gather data from customers, prospects, non-customers, and competitors customers. The key step is to assume that you have something to learn from your competition. In the case of the better mousetrap you would be looking for folks with a mouse problem who are unsatisfied by current solutions, these are "non-customers."

lutorm 18y ago

You think higher appetite for risk is universally beneficial? I'd submit that the current economic situation shows otherwise. I see nothing beneficial if your overconfidence causes you to incorrectly estimate your risk exposure.

ChaitanyaSai 18y ago
I think that there is an optimal appetite for risk. Probably higher than what results in repeated reality checks, but lower than what results in exuberance bubbles. We do tend to calibrate our risk appetites depending on events [1], but there is a baseline around which this level fluctuates. It is a separately interesting issue if overconfidence is merely a scaling factor in the current scenario when it wasn't risk being underestimated in the model, but the model itself being utterly flawed. [1] http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303 http://cat.inist.fr/?aModele=afficheN&cpsidt=19871303

skmurphy 18y ago

Realism about your own skills, if coupled with realism about others' skills, might encourage you to build a stronger team earlier. The point of the article is that "you should listen to those you disagree with instead of writing them off as idiots." Overestimating your own abilities makes it less likely you will listen.

ChaitanyaSai 18y ago
True, but you could also talk about aggregate skill estimation of a team as a whole, and what they should do when another team (or the stock market) disagrees with them. Realism would be nice to arrive at, but say I hope to build a better mousetrap. How do I realistically estimate my chances in this endeavor?
- skmurphy 18y ago
  Another team is different from the stock market. In an economic competition you have a number of opportunities to gather data from customers, prospects, non-customers, and competitors customers. The key step is to assume that you have something to learn from your competition. In the case of the better mousetrap you would be looking for folks with a mouse problem who are unsatisfied by current solutions, these are "non-customers."