Researchers at the University of Bath and The London School of Economics and Political Science (LSE) believe they may have solved a long-standing evolutionary puzzle: why do humans remain stubbornly overconfident of their own abilities– even though it leads to costly mistakes?
The study, published in the Psychological Review , suggests that overconfidence, believing you are better than you actually are, persists not despite its costs - but because of them.
The researchers argue that overconfidence may operate much like a peacock’s tail. In nature, a peacock’s elaborate plumage is a burden: heavy, energy-intensive and highly visible to predators. Yet precisely because it is costly, it serves as a reliable signal - only the healthiest individuals can afford to carry it.
According to the study, human self-belief may function in a similar way, helping to reveal otherwise hidden ability.
“Overconfidence is strikingly common and often costly,” said Professor Chris Dawson, behavioural economist at the University of Bath’s School of Management. “It contributes to failed businesses, excessive risk-taking and poor decisions. But the real puzzle is why evolution hasn’t eliminated it. Our research suggests that those costs are exactly what makes it useful.”
Overconfidence leads to decision errors and excessive risk-taking. But these costs are not evenly distributed. People with greater underlying ability tend to make fewer, or less damaging, mistakes when they hold higher self-belief.
So just as only the healthiest peacocks can sustain the largest tails, only the most capable people can consistently sustain high self-belief without suffering severe consequences. This drive to impress others leads to general overconfidence, but ensures our egos remain an informative signal of true ability.
“If there were no costs associated with overconfidence, everyone could simply inflate their claims as much as possible, and self-belief would become meaningless,” said Professor Dawson. “What keeps it credible is that holding inflated self-beliefs is less costly for the more able.”
More confident individuals do not only bear lower costs from greater self-belief but also greater benefits.
“Confidence opens doors,” said Professor Dawson. “But once those doors are open, it is real ability that determines who succeeds. That’s why the signal works. The more confident are more likely to gain influence, achieve higher status and access valuable opportunities - from leadership roles to promotions and relationships.”
The new study builds upon a famous theory by evolutionary biologist Robert Trivers, who argued that self-deception evolved because it helps us deceive others more effectively. Trivers noted that conscious bluffing often fails to convince due to subtle behavioural cues like nervousness or vocal strain. By genuinely believing our own hype, we suppress those cues and become highly persuasive.
However, the new research addresses a critical question that Trivers left unanswered: if overconfidence is so widespread, why don’t we simply discount confident claims as cheap talk?
"Trivers showed that truly believing what you say makes you more persuasive," said Professor David de Meza, from LSE’s Department of Management. "But an unresolved question has been why people don't simply assume that confident claims are exaggerated.
“Our research answers that: self-beliefs are discounted, but unless you are overconfident, you will be underestimated. It is precisely because excessive self-belief carries a price that it can carry information. Everything hangs together because only those who genuinely have something to offer can afford to make the boldest claims."
According to Professor Dawson: “This signalling logic explains why men tend to be more overconfident than women. Historically, the sexes faced different mating incentives. While men prioritized highly visible physical cues of fertility, women prioritized traits like status, commitment, and resource acquisition. Because these qualities are harder to observe directly, they must be signalled. Overconfidence evolved as a credible way for men to signal this underlying capability.”
The study also explains loss aversion - our irrational tendency to fear losses more than we value gains. Rather than being a malfunction, the researchers argue that loss aversion acts as a hidden handbrake on overconfidence.
While this caution offsets the worst dangers, it cannot fully wipe out the costs of overconfidence - meaning the signal remains genuinely costly and credible.
"People talk confidently but act cautiously," said Professor David de Meza. "This combination lets you project a high-status image while hidden caution doesn’t completely alleviate the costs, but it keeps you from taking fatal risks.
Crucially, this caution often remains hidden, meaning it does not undermine the confident image individuals present to others.
“Overconfidence and loss aversion are a well-matched pair," said de Meza.
The findings challenge the common assumption that biases should be eliminated wherever possible. The researchers say that policies or interventions aimed at removing overconfidence and loss aversion entirely could inadvertently do more harm than good: without overconfidence, people may struggle to persuade others or seize opportunities; and without loss aversion, they may take excessive risks.
Talking the Talk, Not Walking the Walk: The Coevolution of Overconfidence and Loss Aversion is published in Psychological Review at: https://doi.org/10.1037/rev0000644 .
Psychological Review
Data/statistical analysis
People
Talking the Talk, Not Walking the Walk: The Coevolution of Overconfidence and Loss Aversion
20-Jul-2026