From the Vault: Overconfidence, Part 2

Your Mind. My name is Robert Lamb and I'm Joe McCormick, and we're back with part two of our discussion of over confidence. That's right. If you did not listen to the previous episode, do go back and listen to that episode, because we're gonna lay the ground work. We're going to discuss over confidence in hubrists and mythology in human histories,

and then get into the psychology of it. What various psychological studies have revealed and continue to reveal about the nature of over confidence and how we can divide this sort of a morphous concept of over confidence out into categories that can be more easily studied and understood. That's

right now. In the last episode, One of the main things we talked about was this huge new review of the scientific literature on something known as the better than average effect, which is the tendency for people to rate themselves as better than average with respect to their peers on all kinds of stuff. One classic example is that something like nine three percent of people think they're a

better than average driver. So if you're if you're listening to this as you drive, eyes back on the road, and make sure you use this turn signals, turn signals, stays, save lives, turn signals. Let other drivers and pedestrians know what you intend to do. Even if you think you're a great driver, drive like you're less good than you are,

and it will make you a better driver. Drive like you can't see all the other cars and pedestrians around you, because sometimes you cannot drive like you're driving a murder weapon, because potentially you are. It's quite true, all right now. One of the things we talked about in the last episode was a paper from seventeen by Don Amore and Derek Schatz called The Three Faces of Overconfidence, which which actually broke over confidence down into three distinct categories of

of bias or misperception, and uh. And we we talked about those a little bit last time. We're going to be exploring more of what that paper had to say, and it's critiques of overconfidence research specifically with reference to these three types of overconfidence, and as a brief refresher, the three types are overestimation, overplacement, and over precision. Overestimation is thinking that you're better than you are, and this would be with reference to some kind of, uh, you know,

objective measure out in the world. So if you think that you are taller than you are, you know, if you think that you can jump higher than you can, if you think that you would get a better score on a test than you actually could, that's overestimation. The next one, over placement, is similar, but instead it's comparing yourself with other people. So the better than average effect would be an example of overplacement. It's, you know, thinking you are better than average compared to your peers at

some task. Or it would be thinking that you know that you work harder than other people, or thinking that you are smarter than other people. Of course, with the if, it's over confidence meaning that those are not actually accurate assessments. And then finally the other one would be over precision, which is being too sure that you know the truth. Again, this this might be called epistemic over confidence. It's just being too certain that your beliefs are correct. Now, to

get into more in chats is paper from. One of the questions that they address is what actually drives some of these different effects as as they are manifested. So they start with overestimation. What causes us to say I think we would get a better score on a test than we do, to think we have more money in the bank than we do. A common answer that people give to this is the idea of wishful thinking. It would feel good if this were true, therefore I believe

it right. Uh. The authors don't think that this explanation is very plausible, and they offer several problems with it, and we can interrogate these, maybe disagree with them as we go on. But first of all, they say, you know, self delusion is demonstrably maladaptive. For example, a tendency toward wishful thinking about the safety of kissing sharks so with tongue is not a trait that the environment will tend to select For people overconfident about their academic abilities, will

tend not to study and actually do worse. People who believe themselves invulnerable will take risks that sometimes get them killed. This might seem obvious, but there is actually plenty of research on this. I mean, people who are overconfident about their abilities do face a lot of downsides when those abilities are put to the test. Yeah, I mean, one example from literature that comes to mine is that of Macbeth, who believes himself protected by prophecy um and then of

course uh snuffs it because exactly. But then again, I think, okay, so it is true that these people will face a lot of downside, But then again, people do engage in self destructive, self deluded behavior all the time. This is

a common feature of human life. Yeah, I mean, for instance, we were just recently talking about the placebo effect on our movie episode where we talked about the fly and about the possibility that the placebo effect is basically due to uh, you know, this innate tendency towards self delusion that may very well be adaptive in at least in this scenario where yeah, we we benefit from being able to believe something is going to work and and uh

and and and experiencing at least a small physical benefit from it, like a small curative benefit from it. And then um, you know, I also can't help but think that, you know, self delusion entails far more than just over confidence.

It also entails all manner of paranoia. And there is a strong case for the adaptive nature of say, making a type one error in cognition false positive, the belief that the rustle in the tall grass is that of a tiger when it's not, because if you make the type two uh are you're more likely to be eaten by the tiger? Right? Right? Yeah, having accurate information about the world is actually very useful, and having inaccurate information

can kill you. Yeah, but but I'm not so much you know, trying to disagree with the maladaptive self delusion argument that we mentioned earlier, but but rather, you know, to point out that the human experiences is rife with self delusions. So might a dash of overconfidence, even in the form of overestimation, served to balance out this alchemy

of you know, of our perception of reality. For example, so you have a karaoke singer, and granted karaoke is very low stakes, but you could involve of social embarrassment, which you could fear would lead to ostracism, and that's actually one of the most powerful negative motivators on human behavior, right. But again, karaoke is also one of these things where

like sometimes it's cool to do it badly. So this is not a perfect example, but so you have a kara karaoke singer that imbibes in a little liquid courage before taking the microphone, as most karaoke participants are are are wont to do. Uh, but yeah, they get a little liquid courage because they know they don't have the greatest voice in the world. And then they feel a little awkward getting up there, but but they know that a little bit of booze induced over confidence might help matters.

I think you're exactly right there, and this this is funny to start here because I think while the authors make tons of good points, this is one of the ones they make that I might disagree with the most. I think that there are antagonistic adaptations in human behavior. One pressure might favor having an accurate picture of the world, assessing things in a clear and accurate way, while a cross pressure favor self deception, especially self deception in the

form of overconfidence. For example, you might be more likely to survive if you have accurate assessments of your own abilities, but you might be more likely to take big risks with potentially big rewards if you overestimate your abilities or self delusional. Over confidence could be adaptive because it helps us persuade or even deceive other people about our worth. Yeah. You ultimately you have to you have to believe in yourself if you know other people are not going to

believe in you for you, right right. I mean we we talked in the last episode about how it's probably not a coincidence that you really often notice over confidence in people who occupy high status leadership roles. How they get there. I mean, it's not hard to imagine the

overconfidence help to them get to that point. Yeah, and it's uh sometime it's a fun, sometimes terrifying exercise to like if you if you engage with people like this and then when you realize, oh, they're just really overconfidence. They don't they're they're not to say they're not skilled, but when you realize unless they're not, sometimes they're not.

But sometimes you really you realize, oh, there there is this gap between ability and uh and and and what they're they're saying they're going to deliver on, or what they are estimating the future will consist of. Yeah, I mean, it is kind of shocking how often in life you will suddenly come to a realization that, you know, the boss or the leader or whatever's main skill is b essing like that they can just go out there and wing it in a way that you would be too

timid and reserve to do. Right now, this idea of you know, accurate assessments playing into our our own abilities, I couldn't help but think of the film Butch casting the Sundance Kid in this scenario, because it really as

it relates to two specific points in the film. One is the whole would you make that jump if you didn't have to scenario where they're being tracked, they're being hunted, and they've come to this, uh, this this cliff overlooking this river, and they realize that if they jump, if they jump off this cliff and they land in that river and they don't die, they'll get away because the stakes are such that those pursuing them will not following them. They will not make that jump if they don't need to.

Um So, so so there's there's that, and then at the very end there's kind of a going out the old fashioned way guns ablazing scenario where they're cornered, they're going to slowly be killed and they decided to just

go for it, to just bust out shooting and just fight. Right. So, so the incentives, like the evolutionary incentives on a brain generating accurate pictures of the world versus self deluded over confidence, those could very well be just the contrast between a low risk, low reward strategy versus a high risk, high reward strike, right, yeah, so yeah, the first example definitely high risk, high reward, Like it was pretty much their only their best option for survival at that point, and

they took it, and in the film they survive. At the end of the film, it's pretty much implied that they die, but but at the same time, it's it still seems to be their best option, if not their best option for surviving. It's kind of at least like the psychological best option. You know, we're we're gonna stay in here and die like rats, or are we gonna you know, just burst out there and uh, you know die like heroes in a film that is named after them. You know, man, that's a great movie. I want to

go back, and why I haven't seen it? I remember except the end. I mean, the ending is kind of a downer, but uh but yeah, it's it's it's surprisingly sweet for a for a violent outlaw movie. Yeah, it's a good one. And you know, I mentioned him Inbeth earlier in the whole idea of you know, draping himself in prophecy and using that to to to to pump

himself up. But that doesn't bring up bring to mind the rule of religion and all of this, you know, I mean, certainly a lot of the things that religion can do to your estimation of ability or you know, uh, you know, you can revolve around you know, the survivability of the soul for example, pull you know, and like

what will happen if I act a certain way in life? Yeah, and I think there could possibly be cross pressures going the same way with that, I mean that that there are some evolutionary drawbacks and some some advantages to it, right. And then of course that's not to say that religious motivations, uh,

you know exist free of social of course. I guess you know, there's going to be a rich interplay between those and that's you know, that's something that comes up, for instance, in UM when you look at studies of say, suicide bombers. You know where on one hand, you can look at it and just go with the simple scenario of oh, here's a person who believes that if they die doing this act then they'll be rewarded in the afterlife.

But then behind that there's a whole social scenario as well of other humans, you know, telling them that this is the thing to do, etcetera. Yeah, motivations are are a rich stew of many different influences. I mean it's usually hard to nail down a single inciting incident or

cause that lead people down a path in life. And in fact, I think a lot of times even when people do that with themselves and say this was the reason I became or whatever I did whatever, I think a lot of times they're over some they're they're wrong about themselves. So basically self delusion, we're all just houses of cards. I'm just ready to be knocked down at any point. Well, but there's another way of putting it. Now.

One thing you and I could be getting wrong here is if we're talking properly about self delusion or some other type of bias or like misperception in the brain, because the authors here they're saying, okay, self delusion specifically, maybe self delusion implies that there's there's a sort of transformation going on somewhere in the brain, like the brain gets accurate information about the world and then just somehow presents it to the conscious mind in a skewed way.

The authors share think that, especially if you're talking about wishful thinking, is the brand of self delusion, uh, you know, getting false perceptions about the world in or to feel better. They think that doesn't really work from a like unconscious mind to conscious mind model, because emotions and moods also seem to emerge from the unconscious mind, not from the

conscious mind. But then there's another thing they go to, which is that they argue the empirical evidence for true self deception in overestimation it's actually kind of weak and kind of mixed. Why would this be, Well, first of all, they say, it's hard to separate true self deception from attempts to deceive others, including the researchers. So how can you tell when somebody truly overestimates their own traits or abilities versus they just tell you that they think their

traits or abilities are better than they are. In a lot of cases, both would manifest equally as outward over confidence. Now, you can come up with some methodologies and some tests to try to get around this, Like you can make people bet sums of money that would where the outcome of the bet would be dependent on how good they actually are at a task or something. But in a lot of cases, they say, it's hard to tell the difference between true self deception and just attempts to deceive

other people. Another thing they point out is that you don't actually have to be deceiving yourself to overestimate your abilities. You could be genuinely completely ignorant of the fact that you're not as good as you think you are. Uh. And here's one place that the famous Dunning Krueger effect comes in. Now you may have heard about the Dunning Krueger effect, but very short sketch on it. Of course, overlaps with a lot of what we're talking about today.

Participants less skilled in a task or subject area can be prone to show even greater overestimation of their abilities in that skill or subject area. So with some skills, the worst you are, the more you overestimate your awesomeness. Now, why why on earth would this be Well, the authors here mentioned this could just simply come from your low

skills providing you with a or frame of reference. You don't know enough about this task or skill or subject area to even understand how much you don't know, So, like the Dunning Kruger effect would show not self deception but genuine ignorance. You lack enough information to understand how bad you're failing. Like I think a good example of this is you know, you read you you read one theory about some phenomena and uh, and it can be

rather convincing. It can be so convincing that you think, well, this is it. It made a great case. But if you don't, if if you don't actually look at some of the other theories out there or look at uh, you know, some sort of if you look at writings or or pieces that actually compare them, or do some sort of meta analysis, then you don't really have a proper frame of reference or even like sort of I wouldn't even say like nothing like a perfect frame of reference,

but even say like a healthy frame of reference. Yes, you can go so like, you read one article about a subject and then you're an expert, and then you start reading more and you realize like, oh wait a minute, you know there's so much I don't understand that your estimation of your own expertise drops sharply after Yeah, like you might realize, oh, well, there are other theories, or you might realize, oh well, this was just one person's

summary of this particular theory. And oh and then on top of that, perhaps they had a particular acts to grind in writing it, etcetera. Yeah, that that's a great example. I mean not to say that you should doubt everything you read, but I mean, yeah, you should have. You should you should have healthy doubt, not you know, not denialism, but but you know, just be aware that you don't know everything, and you should be especially suspicious when you have dipped your toes into a subject and now feel

that you fully understand it. And we say that as a professional toe dippers. Uh. Now, finally they point out that the empirical evidence for wishful thinking itself in general as a psychological phenomenon. They say, this is not actually strong. Uh, if if there were strong evidence for wishful thinking. Wouldn't it be the case that more desirable outcomes would be more strongly believed, And they say, no, studies that try to test this out do not find this to be

the case. It's not the case that the more you want something, the more you believe it to be true. And there are only a few types of scenarios where there's any evidence of this at all, such as scenarios where all outcomes are equally likely, like a dice roll or something. Now that is interesting to think of in terms of dungeons and dragons, were frequently one is either making an attack or doing some sort of attempting some sort of act that requires a skill check. And I

find myself doing this. You'll, you go up there and you begin to explain what your character is going to do, as if you hit that natural twenty that's kind of the Yeah. So I find myself engaging in a lot of that level of overconfidence with my character because ultimately it all comes down to the roll of the dice, you know, unless I'm trying to you know, leap off of the democ organ's head or something that is going to be extremely difficult because they're going to be additional

numerical you know values. Uh, you know added is attracted from the attempt. You know, ultimately it's still gonna be one to twenty one being h you know, a pretty much complete fail. Uh. You know that's gonna be the one where you slip and stab yourself with your own sword, or it's gonna be that natural twenty which is going to be you know, the wonder hit where you do extra damage. That is a fantastic example. I I was trying to think of cases where I thought I really

did engage in wishful thinking, and I couldn't think. I'm sure I do sometimes, but yeah, they say it's not actually as common as people think it is. And here's maybe one case. I think in Dungeons and Dragons, I have yet to meet a player or be a player that does not engage in will wish will thinking. Every time you roll the dice, like nobody, nobody rolls that dice and it says, all right, this is how I'm gonna fall off this table or this is how I'm going to fall into the next trap, and you know,

and skewer myself on a stake. No, we want the best outcome and we we have it in our mind before the dice puts this in our place. Now, another thing that the authors here bring up is that overestimation itself. Remember again, that's just thinking that you are better than you are in some way in terms of abilities or traits or something. Um that this actually has a mixed evidential record. It's not always the case that we overestimate ourselves on all qualities or tasks. It's more the case

for some things in particular. And they give a couple of examples of things where there really is a ton of evidence for consistent overestimation. One is something you brought up in the last episode, Robert, the planning fallacy. There is really good evidence that people consistently overestimate how fast they'll be able to get things done or complete a project of some kind. And this is especially true if

the project is difficult and novel. So like, if I I try to, you know, I put together some complex thing for you to do that's hard and you've never done it before, you are really likely to massively underestimate how much time it's going to take you. Right if you're like, well, you know, I'm not a handyman, but I think I'm gonna install this sink myself and then you watch a weekend just vanish. Yeah, I know that feeling. Another one that they site is the illusion of control.

People pretty consistently overestimate how much control they, well they will have over future outcomes, even things that that they should understand are basically random. Right. You see this financially in business wise a lot of times where someone will have they think they have a clear idea of like how things are going to flow, but they're they're just not taking into account all the factors they cannot control, and say the economy or or or or just the

industry that they're a part of. But they're kind of they're acting, they're making choices based on sort of like a not even a best case scenario, but sort of like a standard scenario. You know, Yeah, I think I know what you mean. Like they're they're not counting on the storm, and they're also not counting on the wind to completely die away, and that's how they're basing, you know, their their estimate of how long it's going to take

to sail across the sea. Oh yeah, I mean that that's another thing, like we there's actually a name for this. I've forgotten it at the moment, but maybe I'll call it to mind in a second. But uh, it's the the assumption that the future will be like the present. Maybe it's called the continuation fallacy or um. But now there's one more thing that they bring up with respect to overestimation specifically, uh, and this is a standard finding that applies to a lot of the research on overestimation.

It's called the hard easy distinction or the hard easy effect. And UH, this one is interesting because we'll see some variations with it in other types of overconfidence. But it goes like this, we are more likely to overestimate our abilities on hard tasks and underestimate our abilities on easy ones. So again, like the hard project comes up with the

planning foul. See, you massively underestimate how much time it's going to take you to do that hard, complex novel thing, but then you might overestimate how much time it's going to take you to do something that's a common easy task. I guess that the main example that's coming to mind on this one would be the scenario where driving across town are going to a particular destination takes less time than you think it will and then you show up

like fifteen minutes early yea or or worse yeah. And the authors here have some explanations for how exactly this is working that we'll get to an abid who we take a break, Yes, we should, and when we come back we will continue our journey through over confidence. Thank alright, we're back. All right. So we've been talking about this paper about over confidence, but the three types of overconfidence

by shots and more. We were just talking about overestimation, the belief that you're better than you are, especially with respect to some kind of objective measure or independent measure. And so we want to move on to the next type of overconfidence they talk about, which is over placement. And again this is different from overestimation because this is thinking that you're better than you are with respect to

other people and judging yourself compared to others. Now, the authors have some methodological critiques of some of the literature here, but they acknowledge there's a lot of evidence for overplacement, citing the better than average effect in all its beastly forms, Like in the other paper that we talked about that was you know, recently found to be extremely robust. Uh they've got some quibbles about methodology and some of these

studies like using ambiguous scales or measures. Robert, you were talking, I think in the last episode about you know how some of these types of things like uh, you know, how people rate themselves in terms of attractiveness or intelligence or something. These can of course suffer from ambiguous criteria, right yeah, or sometimes just straight up unfair criteria, racist criteria, um, misogynistic criteria, etcetera. Well, yeah, it absolutely has all those

negative effects. I mean, I think overplacement is like it's behind a lot of the worst types of prejudices that make themselves known. But even if you're just like looking at what is the quality you're trying to measure, you know, attractiveness or something like that, that there's usually not like a way of rating that is it's all based on these kind of ambiguous subjective judgments. One great example of this is something that we've brought up several times already,

like the driving example. So Vinson in one did a study where he discovered that nine percent of American drivers rated themselves above the median and driving ability. Obviously, whatever criterion you use, it's impossible for to be above the media, and it would have to be you know, like, um, the majority can be above average, but the majority cannot

be above the median. And the authors point out this would be more impressive if it were more specific, because due to this problem with like ambiguous scales or measures, anybody could technically have their own definition of what makes

a good drive. Ever, so you could be answering that thinking like, well, there are things that I do well when I drive, and maybe they're different from what somebody else thinks that they do well when they drive, and that's their criterion, right, I mean, your your definition of being a good driver could just be I did not you know, I wasn't in a wreck on the way

to work this morning, you know. Or or it could be I get the places I need to go fast, yeah, like in those are those are are definitely you know, not necessarily the same vision of good driving. Or I look really cool when I do it, you know. Uh. There's another thing they bring up which is interesting, which is the role of self selection in increasing the apparent

prevalence of overconfidence in the real world. So an example would be like this, On average, more overconfident people are likely to apply for jobs just sort of by definition, right, more overconfident people are likely to start businesses, to run for office, So we're we're exposed to more of these people, and this could lead to us thinking that their confidence level is more represented in the general population than it actually is. Oh yeah, you turn onto television. It's what

it's almost exclusively overly confident people. That's true. Yeah, So if you just look at like business leadership, politics, celebrities, all this, you're gonna see. I think you will see in general way more over confidence than you just will talking to your friends and relatives and co workers. Now here's a really interesting thing. Remember we talked about the hard easy effect or the easy heart effect with overestimation, where people tend to overestimate their abilities on hard jobs

and underestimate their abilities on easy jobs. Apparently, for overplacement, it's there's also an easy heart effect, but it's in the exact opposite direction. With overplacement, you overplace yourselves relative We overplace ourselves relative to others on easy, common tasks and underplace our selves relative to others on difficult, unusual, or rare ones. So again, what would be some examples

of this? Uh, you think you're in the ninety percentile of drivers, but really you're in the fort This is an easy, common task. On the other hand, people think

that they are less likely than others to win difficult competitions. Uh. Studies show that when there's a teacher that decides to make an exam harder and graded on a curve, students expect their grades to be worse than others, even when there's common knowledge that there will be a curve, So as the test gets harder, students perceived that they will do worse relative to other classmates. That's kind of interesting. Uh. They point out that people believe they are worse jugglers

than other people. They believe that they are less likely to win the lottery than other people. Again a difficult, rare thing, uh, And that they here's here's a very interesting version. Just in terms of ages. People believe they are less likely than other people to of past one hundred, But they also think they're more likely than other people

to live past seventy Interesting. Well, of course, both of those kind of depends on where you are in the age spectrum when you're making that estimation, you know, because you could be I mean, I mean, but apparently it's true of all age. Yeah, but also your quality of life, right, I mean for some people that prospect of living two hundred, depending on where you are healthwise, that might be terrifying. That might be it might be wishful thinking that you'll

expire sooner than that. Uh, or it could be the other way around. You know. Um, what kind of explanations are they they're throwing out? Yeah, this was interesting? So yeah, why do we fail in opposite directions here? Depending on whether we're imagining our performance against objective measures versus relative to others and the author's site solutions from some of Moore's previously previous work with other authors, They write this quote.

If people make any errors estimating how well they've done or will do, then it stands to reason they're more likely to over us to make a low score and more likely to underestimate a high score. That's the herd easy effect. As long as people have more uncertainty about other scores, they will tend to make even more regressive

estimates of others than of self. The consequence would be that they overestimate others even more than themselves on difficult tasks and come to believe that they are worse than others. The opposite would hold true for easy tasks. People would underestimate others more than themselves and wind up believing that they are better than others. So that took me a minute to get my head around, but then I finally

made sense of it. So when you're not sure how you will do it something, as we're always you know, not sure, there's a ton of uncertainty in life, or you're not sure how others will do they're simply more room for possibility to guess high if your performance is likely to be low, and more room to guess low if your performance is likely to be high. And this

applies to both the self and other people. Since we know even less about other people than we do about ourselves, we're going to spend more time guessing wrong in these vast over and under zones for other people, depending on what type of task it is. Now we're going to talk about over precision from this two thousand seventeen study. Now, over precision again is that that's like having way more confidence than you should about what you believe to be true.

So I could ask you, you know, I could ask you to answer a question that I could ask you how confident you are that your answer is correct. Uh. And the authors here right quote results routinely find that hit rates inside confidence intervals are below fifty percent, implying that people set their ranges too precisely, acting as if

they're inappropriately confident that their beliefs are accurate. So if you take a quiz, you say you're more than confident on average about your answers, and you're actually more like fifty percent correct on average. This is something that's been found a bunch of times. It's quite clear that there's tons of over precision in human behavior. The authors have a few critiques about like common research paradigms that are

used to study this. One example is they say, you know, it may be that normal people don't have a very solid understanding of how to use confidence intervals, so there have been other ways of trying to measure it. But however, the authors here believe that over precision is the most pervasive form of over confidence. You find it absolutely ever everywhere, even in experts talking about their own subject matter. I think that's come up on the show before that, I

don't remember when. After this, the authors here turned to the question UH, a question we talked about a little before, could over confidence actually be useful? Like? How do why does it make sense for a brain to be over confident? Uh? And they talk about explanations in two main categories, intra

personal and interpersonal. Uh. The authors generally think the evidence for the interpersonal explanations, the explanations and how it works on other people are stronger than the intra personal ones, though there could could be some good intrapersonal ones. For example, you know, maybe over confidence doesn't just make you feel good, it, as we hypothesized earlier, makes you more likely to take

risks that can pay off big. Yeah. Well, I mean, for instance, to come to to go to like a predator prey scenario, like one is reminded of the you know, how effective your average predator is. You know they are going to fail a lot. And granted, a leopard is not really subject to human you know, over confidence or under confidence, but certainly, if you if you if you look at a human scenario, if you look at human hunters, you know it, it's certainly a situation where it would

pay to be overconfident. Uh, to a certain degree. Yeah, I think you can find some analogies of confidence and over confidence and animals like, you know, how likely are you to try to take down prey animal that you're very unlikely to succeed against what you know would provide you with a lot of meat and energy of you

do right. Of course, the reverse of the other side of that is that you would not need want to be so overconfident you were going after prey that was extremely likely to kill you if you try to bring it down. Right. But the authors here they do think that there's really good evidence for interpersonal benefits for over confidence. One example would be all the empirical evidence that already exists that just outwardly projecting confidence has all these benefits

affecting how other people see us. There are studies that show that highly confident people are more persuasive, they're more influential, they're perceived as more sexually attractive, they tend to get promoted to positions of authority in groups um, and it's possible that confidence is actually more important than competence in determining who gets promoted to high status positions the author's

right quote. While a preference for confident leaders may make sense if there's a correlation, however, weak between confidence and competence. There is real risk in selecting over confident leaders. Well, I mean because on one hand, you on a boss that can say, you know, do their job and and keep the company afloat and actually grow the business, etcetera,

all the various catchphrases. But you also want a boss that you can kind of like you can you can you can trust that they're doing their thing like they seem confident. I guess they have their whole end of it figured out, and maybe I can focus on my own thing and not my own role in the company without you know, freaking out about what's going to happen tomorrow. Well, maybe in the business scenario we should pivot to talking

about the Icarus paradox. Oh, all right, we're gonna take a quick break, but we'll be right back with more. And we're back. So, Robert, you wanted to bring in

a concept from the business world about overconfidence, the Icarus paradox. Yeah, And I'm as surprised as maybe some of you are that I'm bringing in a something business wise, but it caught my attention when I was looking for things on for papers and so forth on over confidence, and also looking at Greek mythology and so forth, because yeah, the

Acarus paradox invokes the story of Chris rather directly. And I think it also makes sense at another level because you know, we don't have gods uh so much anymore, Like these are not the driving commanding forces in our world. But we do have institutions, industries, global economies, and these are not unlike the concepts of the gods. Right. You know, they're sometimes lawful, sometimes chaotic entities that are likely to destroy you if you question their authority or if you

you you turn against them. But anyway, I ran across this interesting concept of the Acress paradox um. It was devised by Canadian economist Danny Miller, and he points out that businesses are often like Icarus in the myth They start out confident and competent, they rise, but then they perish. Uh. The The irony, he writes, is that many of the most dramatically successful companies are prone to this exact sort

of failure. Uh. And and it doesn't in the business sense, since businesses are sometimes less likely to they're more like the gods. You know, they're they have downfalls, but there may be they may very well be immortal. In some cases, they're still alive. They're just chained to a rock getting their liver pecked out by an eagle. Right for eternity. You know, maybe they just declare multiple bankruptcies. Immortal declares bankruptcy is a different thing than than a corporation doing it.

Um wait, what is that eagle. It's like a private equity eagle. Yeah, the private equity eagle. Um yeah. He mentioned several companies and discussing this, and and most of them, I think that he was discussing, are still around, like they have survived their downfalls. Uh but yeah, yeah. He writes that the irony is that that many of these dramatically successful companies are prone to these sort of failures.

And what's more, the very factors that drive success, when taken to excess, are the factors that bring about decline. So I think this is an interesting model to look at, not only for the you know, because it's a just a take on it from the business world, but I think he can also serve as sort of a reflecting pool for some of the individual concepts that we've discussed already by placing them outside of the human psyche and looking at them in the context of an organization or

a culture. So Miller wrote a book about this, The Acarious Paradox. How exceptional companies bring about their own downfall, New Lessons in the dynamics of corporate success, decline, and renewal. I know you love a long title like that, um, but I also I was mainly looking at his Business Horizons article that he wrote on the subject, and he summarizes a lot of the key points. So Miller identified four key to trajectories in the richest to rags business scenario.

So the first one that he mentions is the focusing trajectory. In this trajectory, the craftsman becomes the tinker. Quote firms whose insular, technocratic monocultures alienate customers with perfect but irrelevant offerings. So I guess in a scenario would be, you know, the company that creates a really groundbreaking product, and then

all they do is tinker with that concept. All they do is make adjustments to that concept, and eventually, like somebody else is going to create a better widget or a better you know, smartphone, or whatever the situation may be, somebody else is going to take some some you know, some wider swings next comes the venturing trajectory, and this is by which builders become imperialist. And this one, I think is the one that really has the smack of

overconfidence to it. In this trajectory, the strategy of building feeds into over expansion. The goal of growth becomes grandeur, and an entrepreneurial culture becomes one of the gamesman. A divisionalized structure becomes fractured. And then on top of that there's the the inventing trajectory. This is where you go from pioneering to escapist. In this trajectory, innovation feeds into high tech escapism. Science for society transforms into technological utopianism.

Research and development gives way to think tank culture, and the overall culture goes from organic to chaotic. And then he rounds us out with the decoupling trajectory from salesman to drifter quote. Finally, the decoupling trajectory transforms salesman organizations with unparalleled marketing skills, prominent brand names, and broad markets into aimless, bureaucratic drifters whose sales fetish obscures design issues and who produce a stale and disjointed line of me

too offerings. Okay, so that's the company that's more based around marketing culture than around having a good product, right. You know, thinking about these trajectories kind of reminds me of the peaking in high school stereotype in life trajectories. It's a stereotype, but there is some truth to it. I think it's possible that too much success early on in life can kind of corrupt a person, and can kind of corrupt your work ethic, your ability to learn

from mistakes and mature. It's important for people to experience both successes and failures early in life. Yeah, yeah, I think so. It kind of comes act to what we talked about looking at considering Aristotle's uh summary of hubrists saying that the young and the rich were the most likely to engage in it, and the idea that perhaps in some scenarios, certainly there there are plenty of examples of very wealthy people who got there through defeat, like

through learning the lessons of defeat. There are also examples of of people who have you know, arguably maybe you know, never suffered a true defeat like they have. They have remains sort of man children, uh, kind of failed upward. Yeah, that sort of thing. Um. And again we're dealing abroad tropes here. But you know, to some extent, I think

it's useful to consider to consider these, um. But but also I feel like it does get too into the idea that that when we're dealing with the trajectory of of the human life, you know, um, part of it is perhaps comes down to just our ability to forecast the future, our ability to make long to engage in long term planning. Like we're as humans were generally not as good about that. We're certainly not good about planning beyond uh, you know, the scope of a human life.

But but even like beyond the scope of a of a few years, we're better at the short term goals, and it's only with considerable effort that we we get better at considering long term goals. UM. So I think that's important to keep in mind. And all of this now, one thing that I think is also interesting in Miller's writings is that he talks, he talks a bit about over confidence, you know, as a symptom of underlying issues,

you know, as opposed to being like an intrinsic quality. Uh. He writes, Unfortunately, configuration and synergy are usually attained at the cost of myopia. Stellar performers view the world through narrowing telescopes. One point of view takes over, one set of assumptions comes to dominate. The result is complacency and over confidence. And I think that plays into a lot of what what we've we spoke about earlier. You know, Sorry,

I'm trying to make sense of it. Given that this out the word synergy in it, I shouldn't know what that means. By now I've purged it from my brain. Oh okay, I see now, yeah, I'm looking at the quote. Okay, so no, this is this is a very standard thing. Uh. You know, if you have successfully hammered several nails in everything and you've still got the hammer, everything really starts to look like a nail, just because like, if you've had success with the strategy in the past, you don't switch.

You just keep doing what you've done before, even if it doesn't make sense anything like, yeah, this is the this is what works, this is what our product is, and this is what we're going to stick to. Um and and then yeah, he talks a good bit about to do about overconfidence as just a result of success writing quote failure teaches leaders valuable lessons, but good results only reinforce their preconceptions and tether them more firmly to

their tried and true recipes. Success also makes managers overconfident, more prone to excess and neglect, and more given to shape strategies to reflect their own preferences rather than those of the cut stomers and uh, you know. He also points to one of the key aspects of the Acreus paradox being that overconfident, complacent executives extend the very factors that contributed to success to the point where they cause decline.

So the thing that's working on, you know, the button we're pushing that is leading to success, let's just really jam that sucker. You're like the rat in the experiment that keeps pushing the cocaine button. Yeah. So he summarizes that there are really two aspects of the Acreus paradox. One is the success can lead to failure via the

fostering of overconfidence and other factors. And then to the aspects of a business that brings success can also hasten failure or quote, the very causes of success, when extended, may become the causes of failure. And as far as you know ways to fight these transformations, because that's when one question I had, It's like, it's just just the trajectory,

this is what happens. Like this is things can't just go up forever and a business cannot just exist, you know, indefinitely, Like things have to die, right, I mean, these corporations are not like you mortals, but they are given to life and death. They're not eternal. Uh and and he says, he argues that there are ways to fight these transformations. He suggests self reflection and intelligence gathering that guards against excess,

over confidence and irrelevance. And this this I think matches up with what we've been talking about so far in the individual level, like like if you think you're you're gracious, like take a step back and and and uh and and think in the question whether you know you actually are to what extent you are? What else you could be doing to ensure that that that you were actually living up to your overestimation of self? If you think

it's true about yourself, prove it, prove it to you. Yeah, I have to say Miller was a is a is a really good writer about it. This because normally I'm not interested in business culture type stuff like this. But but he does a great job of like tying it back into just the basic human scenario as well. Like like he points out that excellence in any human endeavor, be at arts or sports or what have you, you know, it tends to come at a price. We cannot excel

at everything. We have to make sacrifices and choose what's important in the middle of the road or a jack of all trades approach is not going to lead to greatness, you know, unless it's a story or some fable where greatness is just thrust upon somebody, you know, Uh, there's got to be some sort of a trade off there. And he says it goes for the individual, but it

also applies to companies as well. You can only sharpen your blade if you first realize that it is dull and must be sharpened, you know, like if if you if you believe yourself eternally and infinitely sharp, you're not

going to do the sharpening right. And it's interesting to come back and think about the individual level and think about over confidence in this scenario, like one like basic trophy mentions is the idea of, say, you know, the artists who neglects their family to focus on their art, or a business person that does the same thing. In those scenarios, it be you know, I guess you know, maybe in a warped sensor in a way that that

that caters to their their prime focus. Might it be beneficial to just think, oh, I'm a good dad, I'm a good husband, even when they're not. But it enables them to then put all of their more of their resources anyway into the pursuit of the thing that ultimately matters to them, like you know, card, hard cold cash,

or the pursuit of art. Yeah. Well, so to be clear, obviously this wouldn't mean that it's actually useful in being a good person have any good life, but it may very well be useful in focusing on whatever it is that really matters to you, to be overconfident about your your crappy efforts in other areas of life. Yeah, I think that's entirely true. So it's it's yeah, it's interesting to compare the to the corporate version of this and

the individual version of this. And certainly if you want to read more about this idea of the Chris paradox, uh I certainly recommend checking out more of his writings. So we have all these economic metaphors, like you know from Adam Smith, the Invisible Hand or whatever. I feel like we need an economic metaphor of the nemesis, like the Nemesis that is this force in the market that

swoops into punish hubrist and overconfidence in business. Yeah, sometimes it seems like Nemesis is a little a little uh resistant to doing that. I don't know. I mean, part of it comes down again to the fact that that businesses and corporations are are are less mortal. Well, yeah, I mean it is funny that, uh, we've discussed a lot of these episodes how overconfidence can both lead to disaster and and negative outcomes, but can also in some

cases be highly rewarded and be very lucrative. Yeah. Yeah, you know, I'm also remind talking about, you know, curbing overconfidence or the perception of overconfidence by making statements that cannot be put to the test. You of course see that a lot in the business world. You know that if you're saying you're the best card leadership in the galaxy, you know that you can get away with saying you're

the best car dealership in town. Well then people can say, well, let's see your sales numbers, let's compare you to gems across town. No, even that would be easier to get away with. Like the one that would be hard to get away with is saying like we have the lowest prices in town. That's something like that. Then you're like, then you're stuck either that's true or that's not right. But then again, on a personal and the personal level, you know, you can have your mug that says world's

greatest dad and nobody's gonna call you on that. What you can get out your dad ruler and measure me. Yeah, all right, So I think we've we've reached the end of our discussion here for the week on over confidence, but clearly there's a there's a lot of material here. It will be interesting to hear back from listeners because

I think we all have some perspective on this. We all have experience with with over confidence in others, or certainly in over confidence in ourselves or the management of overconfidence in ourselves, and so we we'd love to hear everyone's thoughts on this. In the meantime, if you want to check other episodes of stuff to blow your mind.

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