Do you know someone who started their own business? How excited and hopeful and enthusiastic were they on launch day? If you asked the them if they believed their business would still be open in five years, the vast majority would say “Of course!”
According to the U.S. Bureau of Labor Statistics, 50% of small business fail within five years.
The failure rate isn’t all that surprising, but it is surprising that most people greatly overestimate their odds of success. Why? Because we frequently think we are better than we really are.
Social psychologists Justin Kruger and David Dunning studied this phenomenon in 1999 and it has since been dubbed the Dunning-Kruger Effect. It is also known as Illusory Superiority, The Optimism Bias, and the Overconfidence Effect.
We're all in this together
Every one of us is vulnerable, not just business owners. For example, if I were to ask you to rate yourself on your driving skills, most of you would say you are above average (93% according to one study). Of course, statistically only half of you would actually be an above average driver.
Over 100 studies on this effect show that we overestimate ourselves in areas such as health, leadership skills, emotional intelligence, and charitable giving. Fun fact: 84% of French men consider themselves to be an above average lover.
The kicker is that those who are the least adept or least knowledgeable are the most likely to overestimate their abilities or knowledge. (Think about that for a second, French men). As Charles Darwin said, “Ignorance more frequently begets confidence than knowledge.”
The fast-track to disappointment
The reason for this cognitive bias or “invisible mind block” is that it helps us to decide and act faster, which is a primary impulse of the lizard brain. Rather than taking time to gather more information or skills, we feel we are expert enough to proceed and we do.
The problem is that miscalling our own abilities often leads to errors that could have been avoided by simply consulting someone who truly is an expert in the field. The Planning Fallacy is a great example of this.
Often the resulting failure from our own self-judgment errors creates disappointment and we beat ourselves up when we realize it was due to our own shortcomings that we didn’t recognize beforehand.
Seeking honesty
To combat this natural tendency we should undertake the often difficult task of self-assessment. As a speaker, the best tool I can use to improve my performance is watching video of my presentations. It can be a painful exercise because my shortcomings become glaringly apparent. It shows me that some areas in which I thought I was a rock star clearly need work as I strive to be an elite speaker.
We should also seek and accept honest feedback from others, especially experts, on our own competencies. Are we really as good as we think we are? If not, where do we need the most improvement?
Adapt a growth mindset and always be open to learning more and expanding your knowledge and skills, especially in areas where you think you are proficient. When you learned enough to move out of the “novice” stage, you may have felt you jumped right to “expert” level instead of the intermediate “amateur” stage you were actually in.
Finally, remember that education is as much about discovering how much there is to be learned as it is about the learning itself.
Think well, be well!
- Steve Haffner