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Saturday, November 27, 2010

Nudge: Post #6

Optimism and Overconfidence: I’d call this one the Lake Wobegon effect: Where “all the children are above average.” In psychology it is referred to as illusory superiority. We have a tendency to give ourselves the nod, the big break, when rating ourselves against others. Can you begin to imagine how this might affect decision making? For example, most entrepreneurs starting a business (which statistically fail over 50% of the time) believe at the 90% level that they will defy the stats! The authors suggest that the pervasiveness of this phenomenon can be disastrous in high-stakes decisions, and people need a memory of a bad event to anchor them back to reality.

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