Ground-Up Governance hasn’t yet directly referred to any nerdy science. If you haven’t heard of the Dunning-Kruger effect, you might enjoy learning about it.

When you’re building the Reallie Steilish board, it might seem super sensible to recruit directors with tonnes of expertise in cool hats, and maybe some serious Eyelashes. After all, who better to steer you toward your best performance?

There’s something really weird about people with lots of expertise, though: they sometimes make the worst predictions about their area of expertise. Why? Because they are overconfident. They know so much about the thing they’re an expert in that they tend to neglect new or weird information that might improve their forecasts. So if you ask your hat-expert board member for a prediction about where the trucker-fedora market is going, the will probably give you a super confident answer that’s completely wrong.

Weird wrinkle to the overconfidence problem: you know who else will be overconfident? People who don’t know very much about hats at all. Maybe they just read the bestselling management book Purple Cap: Transform your hat empire by being resparklable (i.e. by selling sparkly purple hats) (PC:tyhebbr(i.e.bssph)). In fact, the moment they read the book, they feel they know everything there is to know about the relationship among hats, sparkles, purpleness, and sales – more, even, than PC:tyhebbr(i.e.bssph)’s author, Dr. Cappie McSparkle. Their confidence might be so high that when they run in to Dr. McSparkle at a book signing, they think it’s totally appropriate and interesting to explain her own book to her for an hour.

I bet you can already picture how overconfidence might cause problems in a boardroom. They are places that tend to be filled both with experts and with people who know a little bit about a bunch of complicated things. Remember Alisha? Of course you do. Most of us would naturally just turn to her when presented with an apple-like object and ask her to make an expert guess about whether it’s a cake or not. Problem is, as a professional ultra-realistic-apple-shaped cake maker, she might be so confident that her prediction might be worse than someone who knows nothing about cakes or apples at all.

Ground-Up Governance

53. Overconfidence (definition)