Why do some people feel that they're better than they actually are?

As far back as grade school, I remember that the least "appealing" kids were usually the ones who bullied others the most and acted up in cl while they were also the dumbest (academically). Even to this day I deal with some people who feel they're so special, act so arrogantly, boast about themselves so much, and yet they're just "run-of-the-mill." I'm not saying that you have to be blessed with killer good looks and high intellect to be proud of yourself, but I can't stand people who behave so obnoxiously and feel that they know so much more and are so much better than everyone when it's obviously not the case. Why can't such people be much more modest and stop fooling themselves?