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1 - Arrogance is confidence projected outwards (in a way that looks ugly)

2 - People who are arrogant do not ask much questions. Arrogant people are unpleasant to interact with.

3 - Coping mechanism for little internal confidence. Alternatively, nobody told them they are projecting or they can't see this for themselves. In pathetic cases they can not help themselves.

4 - No, not always bad. In some roles it is necessary to exude confidence and a better-than-thou attitude. But when you are not a general, king, pope, or professor, then people will not take kindly to such behavior.

You can avoid being arrogant, the same way you can (try to) avoid being stupid, Andrey Kolmogorov: "Every mathematician believes that he is ahead of the others. The reason none state this belief in public is because they are intelligent people.". Also realize that there is only one way to be perfectly correct, but a possibly infinite ways of being wrong.