Overconfidence can lead to poor decisions from "summary" of Judgment in Managerial Decision Making by Max H. Bazerman,Don A. Moore
The phenomenon of overconfidence represents a common cognitive bias that can significantly impact decision-making processes in managerial contexts. When individuals exhibit overconfidence, they tend to have excessive faith in their own abilities, knowledge, and judgments, leading them to believe that they are more competent and accurate than they actually are. This overestimation of one's capabilities can have detrimental consequences, as it can lead individuals to make suboptimal decisions based on faulty assumptions and incomplete information. One of the key reasons why overconfidence can result in poor decision-making is that it can lead individuals to ignore or downplay important risks and uncertainties associated with their choices. When individuals are overly confident in their assessments, they may fail to adequately consider alternative perspectives, potential pitfalls, and potential sources of error. This can prevent them from engaging in thorough and critical analysis, resulting in decisions that are based on flawed reasoning and incomplete information. Moreover, overconfidence can also fuel a tendency to disregard feedback and information that contradicts one's initial beliefs and assumptions. When individuals are overly confident in their judgments, they may be less likely to seek out and consider information that challenges their existing views, leading to a confirmation bias that reinforces their overconfident stance. This can result in a lack of openness to new ideas and perspectives, hindering the ability to make well-informed decisions that take into account all relevant factors. In addition, overconfidence can contribute to a false sense of invulnerability and a reluctance to seek out advice and input from others. When individuals are excessively confident in their own abilities, they may believe that they have all the answers and that seeking input from others is unnecessary. This can prevent them from leveraging the diverse expertise and perspectives of their team members, leading to decisions that are based on narrow and limited viewpoints.- The concept of overconfidence as a cognitive bias underscores the importance of self-awareness, humility, and a willingness to challenge one's own assumptions in the decision-making process. By recognizing and mitigating the effects of overconfidence, individuals can enhance their ability to make sound and well-informed decisions that are based on a comprehensive understanding of the complexities and uncertainties inherent in managerial decision-making.
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