How do stereotypes limit us from achieving our great potential?

The idea of harming your potential due to the impact of stereotypes is known as stereotype threat. Stereotype threat is closely linked to the a phenomenon known in psychology as the self-fulfilling prophecy. The self-fulfilling prophecy is when somebody inadvertently causes a prediction or stereotype to come true because of the simple fact that they expect it to come true. In other words, if a person is aware of a stereotype, they may act in a certain way that unwittingly brings the stereotype to fruition. This can work as a positive and a negative and psychologists have identified both in action. When somebody has positive expectations for outcomes, there is a greater likelihood that a positive outcome will occur. This is known as the Rosenthal, or more commonly, the Pygmalion Effect.

Naturally, the reverse is true and more relevant to this question. If there are negative expectations that a subject harbors, it is most likely that the subject will act in a way that makes this expectation come true as well. In psychology, this is known as the Golem Effect. So if a person is part of a group in which there are negative stereotypes about that group, the person is likely to act on these low expectations. Psychology has proven that acting on low expectations will result in lower performance.