Measuring Up

Are you a better-than-average driver? According to a number of survey results, a lot of drivers think they are. A Survey by PublicMind at Fairleigh Dickinson University found that 68 percent of the drivers polled considered themselves above average, 30 percent considered themselves average, and just 1 percent considered themselves to be below average. (One percent were unsure or refused to answer.) Similar results have been found in other surveys: A survey of 1,000 drivers conducted by Financial Dynamics (FD) for Allstate found that 64 percent rated themselves as “excellent” or “very good,” but felt only 22 percent of other people their age deserved those ratings. Another survey found that 93 percent of American drivers thought they were above average!

Statistically speaking, that doesn’t add up. In a large sample of drivers, abilities should be spread along a range of skills, from very poor to very good with a large clump somewhere in the middle. About 50 percent would be above average, and 50 percent below.

So what’s going on here? Part of the answer may be that people are more likely to give themselves the benefit of the doubt that they wouldn’t necessarily extend to others. (When you mess up, you have a reason; when someone else does, they just have some excuse.) Another possibility could be big differences in the standard being used by drivers in the self-examination process to evaluate just what “better than average” means. Let’s listen in as a couple of hypothetical drivers explain their driving styles.

Here’s what “Daring Devon” has to say: “I always get where I’m going at least 10 minutes faster than anyone else would, and I can make the car in front of me get out of my way by tailgating and flashing my lights. I never lose my place in heavy traffic by letting someone merge in front of me, and I can zip in and out of fast-moving traffic with only inches of space between cars. I can steer with my knees while texting with one hand and eating breakfast with the other. Most of the accidents I’ve been in were the other person’s fault. For these reasons, I consider myself to be an above-average driver.”

Now let’s hear from “Careful Chris”:

“I never exceed the speed limit, and I always leave early enough to arrive on time so I don’t feel rushed and stressed while I drive. I follow the alternating method to allow cars to merge into my lane in heavy traffic, and in moving traffic I allow one car length between my car and the vehicle in front of me for each 10 m.p.h. I’m going. I find a safe place to pull off the road and park before texting, speaking on the phone or eating. I have never had an accident. For these reasons, I consider myself to be an above-average driver.”

Very different drivers—identical self-assessment.

But it’s not just driving skill that is often measured with a very subjective yardstick. Investors also have very different standards for evaluating how well they measure up to the “average.” Here’s how two hypothetical investors might explain what they do.

First, here’s “Jumpy Jules”:

“I like to concentrate my money in a few exciting ideas. I want everything I own to be going up; diversification just dilutes my gains. I love buying the hot stock in the news, no matter how much I have to pay for it. I hold on to stocks I’ve lost money on because I’m convinced someday they’ll come back and I’ll be vindicated (or at least get back the money I’ve lost.) I can list every investment I didn’t buy that later went up, but can’t remember any of the ones that later fell. My investment horizon is the time between my last account statement and my next one. My gains demonstrate my wisdom; my losses were unforeseeable—or the result of someone else’s bad advice. For these reasons, I consider myself to be an above-average investor.”

“Prudent Pat” takes a different approach: