overestimation

Overestimation is a cognitive bias in which a person overvalues their own abilities, performance, or the likelihood of favorable outcomes beyond what objective evidence would support. It affects judgments about personal skills, project timelines and costs, financial returns, and the probability of events. It is closely related to overconfidence and optimism bias, and it can occur even when relevant data are available or when uncertainty is acknowledged.

Causes and mechanisms include a combination of heuristics and social factors. People may rely on vivid examples or memorable successes (availability bias), anchor estimates to overly optimistic targets, or engage in wishful thinking to align outcomes with desires. Group dynamics such as pressure to present ambitious plans or to conform can amplify the tendency. Information gaps, miscalibration of risk, and underweighting of uncertainty also contribute, and reference data may be ignored or overridden by personal judgment.

Effects can be substantial. Overestimation can lead to poor decision making, underestimated costs and timelines, insufficient risk mitigation, and misallocation of resources. In business and policy, it may trigger project overruns, failed forecasts, and damaged credibility.

Mitigation strategies aim to improve calibration and realism. Approaches include pre-mortems and devil’s advocacy to surface potential failures, red-teaming, and reference-class forecasting. Employing probabilistic planning with ranges and confidence levels, conducting independent reviews, and using checklists or scenario planning can reduce overestimation. Emphasizing data-driven estimates and encouraging skeptical feedback also helps align judgments with evidence.