Believing you're better than you are may help you succeed or fail.
The results, published today in the journal Nature, showed that overconfidence pays off only when there is uncertainty about opponents' real strengths, and when the benefits of the prize at stake is sufficiently larger than the costs.
“So let's say you and I are fighting over some resource,” Johnson said. “As long as there is some uncertainty about the outcome and the resource is valuable compared with the costs incurred in fighting for it, then overconfidence is the best strategy.”
For instance, if people are fighting over an island with oil reserves, the benefit of accessing the oil might be a hundred billion dollars, while the costs of the war might be ten billion.
But if “if the cost of conflict or competition is high, and all for a fairly worthless prize—you're much better off being cautious.”
In many situations humans behave overconfidently, and this gets us into trouble. Hubris, for example, helped contribute to the 2008 financial crisis.
Overconfidence might have another benefit, at least for men. “Men tend to exhibit more false optimism than women, a trait that can help in their two traditional evolutionary roles: fighting rivals and courting women.”
Want to learn more? Read The Narcissism Epidemic: Living in the Age of Entitlement.