Confidence grows faster than knowledge, especially after a few good results.
You know less than you think.
Ten numbers. For each, pull a range you are 90% sure holds the answer.
Make your ranges wider than feels right: you know less than you think.
← Red LinesRed Line 39 of 48 The idea The numbers Try it Where it bends This game’s numbersHow strong the proof isBGood proof, with limits Where it comes from
Most of us feel surer than our knowledge allows. A few good results make it worse: they feel like proof of skill.
In a classic study, about nine in ten drivers rated themselves safer than the middle driver. At most half can be.
Before a decision, write how sure you are. Check later how often you were right at that level of sureness.
Too little confidence means never acting at all.
Park and Budescu, Aggregating multiple probability intervals (2015)ECB: the euroFederal Reserve History: the crash of 1929Bloomberg: Nikkei beats its 1989 high (22 Feb 2024)Eurostat: euro area inflation, Oct 2022EU population by member stateBritannica: the DanubeTulip maniaDutch East India CompanyHyperinflation in the Weimar Republic
Overconfidence is one of the best-studied biases, and overconfident traders earn less, but that good results feed it rests more on theory than on data.
- Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment Brad M. Barber & Terrance Odean, Quarterly Journal of Economics 116(1), 261-292, 2001
- The Trouble With Overconfidence Don A. Moore & Paul J. Healy, Psychological Review 115(2), 502-517, 2008
- Learning to Be Overconfident Simon Gervais & Terrance Odean, Review of Financial Studies 14(1), 1-27, 2001
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
Daniel Kahneman, Thinking, Fast and Slow (2011). In our words, not quoted.
See it in numbers: Overconfidence (From Zero)
Next · Red Line 40Luck and skill look alike up close.Red Line read