From Michael Shermer: According to psychol­o­gist Daniel Kahneman, in his 2011 book Thinking, Fast and Slow, “people tend to be overly opti­mistic about their rela­tive standing on any activity in which they do moder­ately well.” But opti­mism can slide danger­ously into overop­ti­mism. Research shows that chief finan­cial offi­cers, for example, “were grossly over­con­fi­dent about their ability to fore­cast the market” when tested by Duke Univer­sity profes­sors who collected 11,600 CFO fore­casts and matched them to market outcomes and found a corre­la­tion of less than zero! Such over­con­fi­dence can be costly. “The study of CFOs showed that those who were most confi­dent and opti­mistic about the S&P index were also over­con­fi­dent and opti­mistic about the prospects of their own firm, which went on to take more risk than others,” Kahneman notes. · Go to Opting out of overop­ti­mism →