As discussed in a previous tidbit, people are over-confident in their abilities for many reasons. Here's an example...
The price of wine varies enormously by vintage. There is a HUGE industry in predicting which young wines will become expensive when they've aged. There are highly trained and well paid professional wine tasters who assess this through their taste buds and also by using all kinds of weather data.
Someone built a simple statistical model based on just three variables: amount of rain during the winter, amount of rain at harvest, and the temperature during the summer. In a fair test, the statistical model easily beat the wine tasters.
In difficult to predict tasks, like wine assessment (and stock picking), people's over-confidence in their own abilities results in worse predictions than simple statistical models.
- Orley Ashenfelter, "Predicting the Quality and Prices of Bordeaux Wines"
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