In the movie Jab We Met, Kareena Kapoor, in her role as a character called Geet Dhillon, says: ‘Main apni favourite hoon‘. The line went down well with the audience when the film was released and film aficionados like me, still remember it. And the reason for that is fairly straightforward-who in their right mind talks like that?
While people may not talk like that, but there is enough research evidence going around to show that most of us think of ourselves very highly i.e. we are our own favourites, if that makes sense. As Richard Thaler writes in Misbehaving-The Making of Behavioural Economics: ‘Overconfidence may not be in the economists’ dictionary, but it is a well established feature of human nature…Overconfidence is a powerful force.’
People are overconfident about themselves and rate themselves above average on a wide range of things, from intelligence to sexual performance. Michael Foley talks about being above average in the context of professors and students in The Age of Absurdity-Why Modern Life Makes It Hard To Be Happy.
As he writes: ’94 per cent of us [i.e. professors] think we do above-average work…Needless to say, I am among this 94 per cent. And it turns out that teachers are even more deluded than students – a mere 70 per cent of students believe they are above average. The temptation to laugh is checked by another troubling thought: most of my colleagues believe themselves to be terrifically amusing; everyone also has an above-average sense of humour.’This reminds me of a time a long time back when I was appearing for MBA entrance exams in the late 1990s and in my naivety used to answer, ‘my sense of humour,’ when asked what are my areas of strength.
And this above-averageness is a part of many parts of our lives. As Thomas Gilovich and Lee Ross write in The Wisest in the Room-How You Can Benefit From Social Psychology’s Most Powerful Insights: ‘Hundreds of surveys have shown that men and women of all ages, regions of the country, and even social classes tend to rate themselves as above average on almost any positive dimension: more sensitive than average, more unbiased, better leaders, better drivers-you name it.’
In fact, the funny thing is that even people who have been hospitalized for injuries suffered while driving, rate themselves to be better than average drivers or average drivers. As Gary Belsky and Thomas Gilovich write in Why Smart People Make Big Money Mistakes and How to Correct Them: ‘The classic example of this tendency is a 1981 survey of [car] drivers in Sweden, in which 90 per cent of them described themselves as above average drivers. Clearly a large number of the respondents were giving themselves the benefit of what should have been a very large doubt.’
In fact, drivers are not the only ones who feel they are better than average. As Belsky and Gilovich write: ‘Numerous studies over the years have demonstrated significant overconfidence in judgements of doctors, lawyers, engineers, psychologists, and securities analysts. For example, 68 per cent of lawyers involved in civic lases believe that their side will prevail, but-of course-only 50 per cent can.’
The overconfidence effect doesn’t end here. As Jason Zweig writes in Your Money and Your Brain: ‘A nationwide survey of 750 investors found that 74 per cent expected that their mutual funds would ‘consistently beat the S&P 500 every year”. Hence, three fourths of those surveyed believed that their mutual fund would beat the market rate of return. How is that possible?
This overconfidence and above averageness is visible even in case of mergers of companies as well, writes Zweig. ‘Only 37 per cent of corporate managers believe that mergers create value for the buyers…However, when it comes to their own mergers and acquisitions, 58 per cent of experience managers say they have created value.’ Now how is that possible, except in the minds of those managers.
The question is why does this happen? As Gilovich and Ross write: ‘Part of this is simple human vanity…But before you chalk up the above-average effect entirely to people’s motivation to think highly of themselves, consider the possibility that most people really are above average, at least when their own criteria are taken into account.’What does this mean? As economist Thomas Schelling points out: ‘Everybody ranks himself high in qualities he values: careful drivers give weight to care, skilful drivers give weight to skill, and those who think that, whatever else they are not, at least they are polite, give weight to courtesy, and come out high on their own scale. This is the way that every child has the best dog on the block.’
So that explains why most people are overconfident enough to believe that they are above average on different dimensions. As Gilovich and Ross put it: ‘Researchers have found that the above-average effect is much stronger on traits that permit multiple interpretations (‘talented,’ ‘sensible’) than on traits that are more narrowly defined (‘tall,’ ‘punctual’). It is easy for people to have different ‘objects of judgement’ in mind when considering whether they are athletic, artistic, or altruistic, and the object they select tends to be one that favours their own talents. So it should not be a surprise that people so often judge themselves above average.’
And in a world, where rat race is the norm, this feeling of overconfidence, might even do people some good at some points of time. Long story short-being your own favourite, does help, sometimes.