People tend to be biased when assessing their own abilities; this bias is called the Dunning-Kruger effect. Studies show that the poorer the ability, the greater the difference between one’s overestimate of one’s ability and one’s actual ability. One manifestation of this phenomenon is that people who know nothing about a subject and then learn just a little about it tend to think that they know a lot about the subject.
Men seem to have much larger Dunning-Kruger biases than women, as will be immediately obvious to anyone who has had to listen to mansplaining.
The way Dunning and Kruger presented their data in their original paper was unfortunate, as pointed out by Tomasso Dorigo. They binned their data in quartiles, which means that even if people’s estimates of their own abilities were normally distributed about the mean of their actual abilities, the effect would be observed, although not as strongly as in the study. This means that people really do overestimate their abilities, although perhaps not to the extent shown in the original paper.
Now that you know about the Dunning-Kruger effect, how will this influence your study strategy when you are learning something? I think one of the most important steps to take to minimize the bias we all have (described by the Dunning-Kruger effect) is to seek frequent feedback on our progress. If you are weight-lifting, for example, the feedback is quite immediate. If you think that you can lift 80 pounds, and you actually try and find that you can only lift 50 pounds, then you immediately realize that your initial supposition was wrong.
If you are studying an academic subject, test yourself frequently. Find a study partner and test each other. The frequent self-testing will help you to recall what you are learning, and it will also provide you with feedback on how effective your study is.