You are Overconfident

Posted on April 20th, 2014 by admin in Behavioral Finance, Investing

Look at this image: checkershadow_illusion4med Is square labeled A different from square labeled B? The look very different, because they are obviously squares on a checkerboard, right? Wrong. This is an amazing optical illusion. The squares are actually the same color gray. To see how you are fooled, go to this link for MIT researcher Edward Adelson. This shows how you can experience certainty when you are completely wrong. This happens to all of us. We don’t know what we don’t know, and we often are believe something is true when it is in fact false. These common traits inform all of our decision making, and in the investing world, these self delusions can be very expensive. The best way to avoid such mistakes is to be humble and always know you can be wrong.

One Comment on “You are Overconfident”

  1. John

    I need a better explanation of the illusion. Why do they appear so different?

Leave a Reply

More News