Self-serving Bias in Driving

Owning Berkshire Hathaway (BRK) means taking a sizeable position in automobile insurance through BRK's ownership of GEICO. The possibility of self-driving cars concerned me because it seemed that car insurance would be radically changed or even eliminated. However, as I reflect more deeply, automobile insurance is likely to stay as well as become a critical participant in the adoption of the technology. 

Self-driving cars concern most of the people I talk with, but I find myself eagerly awaiting their arrival. Initially, I viewed this difference as based in my dislike for driving. Again, further reflection revealed a superficial analysis. The reality goes back to studies from decades ago that showed drivers, on average, viewed themselves as better than average drivers. I thought to myself, "am I better or worse than other drivers on average?" At first, I reflected on my age and my aptitudes and concluded that I had better than average possibilities. But further analysis revealed my propensity to talk on the phone, work on my computer and change cassette tapes while driving. Those patterns were rooted in my overconfidence on the road - making me a worse than average driver. That's when I gave up, for the most part, driving.

A friend of mine says "we are all the center of our own universe" which is the root of our self-serving bias. It's weird to have such a maladaptive mechanism that would cause us to overestimate ourselves in a setup for worse outcomes. I've come to believe that this self-serving bias feels so good in its "rose colored glasses" effect that we are all wearing those glasses. Self-serving biases are a kind of first generation augmented reality glasses that can also be called "the Lake Wobegone effect," "the overconfidence bias" and even "free will." I used to think it populated more with men, but now I think it's topical and affects everyone after talking with mothers and fathers about their children.

The beauty of insurance companies is their focus on statistical analyses. Insurance companies are the likely proponents of self-driving technologies because they will reveal the statistical advantages of self-driving. There is no question that self-driving cars have and will have a lower likelihood of accidents, but people will be reluctant to embrace that improvement as long as they maintain the bias that their own capacities will cause them to defeat these odds. It will require the insurance company's pricing mechanisms to shape the consumer's sense of paying a higher price for the "right" to beat the odds.