Future star or future flop?
It's a good question -- and one that is answered in a new paper by Cade Massey of Yale and Richard Thaler of the University of Chicago.
Readers of this blog know how often I harp about overconfidence as a source of error. Massey and Thaler find that NFL teams are way overconfident when it comes to their ability to spot talent in draft picks. Just over half the time, they found, the top picks in the draft turn out to be flops.
As they state: "The more information teams acquire about players, the more overconfident they will feel about their ability to make fine distinctions...these findings stand as a reminder that decision-makers often know less than they think they know. This lesson has been implicated in disaster after disaster, from international affairs to financial markets.”