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Theory explained by Oreoluwa Akinnawo
The Spotlight Effect is a cognitive bias that describes how people tend to believe that others are paying more attention to them than they actually are—in other words, our tendency to always feel like we are “in the spotlight.”
Essentially, people tend to believe that in certain situations there is a spotlight highlighting all of their mistakes or flaws, for all the world to see. This is because the spotlight effect is a form of Anchoring Bias, when we are making judgments about social situations, we become anchored to our own perceptions because they are the only thing we have immediate access to. A business that is affected by the spotlight effect might overthink its marketing goals, underestimate the cost of acquiring customers, unintentionally craft an inauthentic brand, or set unrealistic expectations–all things that result in an emotionally frustrated team.
The spotlight effect is the phenomenon in which people tend to believe they are being noticed more than they really are. Being that one is constantly in the center of one's own world, an accurate evaluation of how much one is noticed by others is uncommon. The reason behind the spotlight effect comes from the innate tendency to forget that although one is the center of one's own world, one is not the center of everyone else's. This tendency is especially prominent when one does something atypical.
The references contain experiments and studies that prove this bias is there.