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Management article
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Reference no. SMR3321
Authors: J Edward Russo
Published by: MIT Sloan School of Management
Published in: "MIT Sloan Management Review", 1992
Length: 13 pages

Abstract

Good decision making required more than knowledge of facts, concepts, and relationships. It also requires metaknowledge - an understanding of the limits of our knowledge. Unfortunately, we tend to have a deeply rooted overconfidence in our beliefs and judgments. Because metaknowledge is not recognized or rewarded in practice, nor instilled during formal education, overconfidence has remained a hidden flaw in managerial decision making. This paper examines the costs, causes, and remedies for overconfidence. It also acknowledges that, although overconfidence distorts decision making, it can serve a purpose during decision implementation.

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Abstract

Good decision making required more than knowledge of facts, concepts, and relationships. It also requires metaknowledge - an understanding of the limits of our knowledge. Unfortunately, we tend to have a deeply rooted overconfidence in our beliefs and judgments. Because metaknowledge is not recognized or rewarded in practice, nor instilled during formal education, overconfidence has remained a hidden flaw in managerial decision making. This paper examines the costs, causes, and remedies for overconfidence. It also acknowledges that, although overconfidence distorts decision making, it can serve a purpose during decision implementation.

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