People's perception of their competence often diverges from their true level of competence. We argue that people have such erroneous view of their competence because self-evaluation is an intrinsically difficult task. People live in an information environment that does not contain all the data they need for accurate self-evaluation. The information environment is insufficient in two ways. First, when making self-judgments, people lack crucial categories of information necessary to reach accurate evaluations. Second, although people receive feedback over time that could correct faulty self-assessments, this feedback is often biased, difficult to recognize, or otherwise flawed. Because of the difficulty in making inferences based on such limited and misleading data, it is unreasonable to expect that people will prove accurate in judgments of their skills.