People tend to overestimate the odds of new technologies’ success, say researchers, and that overconfidence can influence big decisions, like investment choices.
“Technology has advanced to the extent that people may not understand how a particular technology works, but they do assume that it will work,” says Chris Robert, associate professor of management in the University of Missouri Trulaske College of Business.
“We found that people unconsciously associate technology with the notion of success, and this association influences decisions about things like financial decisions, and forecasts of business performance. It is important to determine how this assumption may affect people’s choices because many important decisions involve technology in some fashion.”
The ‘Technology Effect’
Robert and his colleagues described overconfidence in technology and its potential for successful outcomes as the “technology effect.” They proposed that this effect is driven by constant exposure to technology, and especially examples of successful technology, whereas less attention is paid to the myriad technological failures, many of which are never publicized or are viewed as temporary failures.
“It turns out that people have more confidence that unfamiliar technologies will provide solutions to a range of problems,” Robert says. “People seem to put new technology in a category of ‘great things that work which I love but don’t understand,’ whereas they are not as excited about familiar technologies like electricity, solar power, or telephones, and they don’t believe these technologies are as likely to provide new solutions.”
Robert says the research also suggests the technology effect might influence people’s behaviors in everyday life.
“For some people, the technology effect might include the idea that unhealthy behaviors like a poor diet are less impactful because they think that eventually, someone will develop technology that provides a cure for their illness.”
Ask an Expert
Robert and his colleagues conducted three studies to investigate the technology effect.
One study measured the extent to which participants unconsciously linked technology to success, and another study asked participants to make business decisions based on whether the performance of the business was based on new technology, familiar technology or non-technology.
In a final study examining investment decisions, Robert and his colleagues demonstrated that participants preferred technology-related stocks—even when they were projected to perform no better than other available options.
Robert says consumers, financial advisers, and corporate decision-makers could benefit from an awareness of the technology effect and its potential consequences.
“People should be mindful that when they make decisions about many things in their lives, they might unconsciously be influenced by how much they think technology can affect the outcome,” Robert says.
“This belief could affect how governments make decisions about allocations of resources, how corporations make decisions about research and development, or how individuals make purchase and investment decisions.
“Because this bias tends to occur especially when the technology in question is unfamiliar, it would be wise to seek the opinion of someone with expertise in that specific technology, especially when making financial decisions.”