Overconfidence effect
How can you avoid overconfidence bias? Here are four tactics for making more accurate predictions:
#1 Quantify the assessment
Research shows we are most vulnerable to overconfidence bias when we generalize. It’s easy to believe we’re great at something if we never judge ourselves with specific benchmarks. For example, most of us believe we are above-average drivers. However, if you analyze how many car accidents you’ve had, how often you speed, and how many times you’ve run over curbs, you’ll probably make a much more realistic assessment of your own abilities. Seek specific measurement, not generalizations.
#2 Literally, think again
Researchers asked participants to make a prediction two separate times. Those who took a pause and then guessed a second time, were more accurate.
#3 Make both a positive and a negative guess
First, write down all the components that could lead to success, then estimate the chances of a winning outcome. Next, identify all the elements that could trip you up. Finally, figure out the chances of failure. The estimates assigned for both the positive and negative estimates should add up to 100%. For example, I have a 70% chance of success and a 30% chance of failure. By quantifying the prediction from both a positive and negative vantage point, you’ll make a more realistic estimate.
#4 Break up big predictions into component parts
Don’t ask the sales team to predict how they’ll do on this quarter’s goals. Instead, ask them to rank themselves on each element: for example, new business closings, up-selling business, and client retention orders. Most of us are notoriously bad at accurately predicting things with a lot of parts. Breaking the prediction down into many small pieces allows us to make more realistic and meticulous estimates.