How great are you really?
What is it?
In 2006 James Montier conducted a survey of 300 professional fund managers, asking if they think that they are better at their job than the average of all fund managers in the survey. These people are not stupid and so they “smelled” the intention behind the question; many said something like “I know everyone thinks they’re above average, but I really am.”
Eventually, 74% believed that they were above average and of the remaining 26% most thought they were about average. Virtually no one thought they were below (or at least confessed this thought). Statistically, these figures are impossible.
Before we start making fun of fund managers (which is a tempting idea, I have to admit), we should be careful. We all are a bit like them. Almost all of us think we are better than average, at least in some (if not most) things. I’m sure you have heard statements like this: “93% of American car drivers think they are better than median”. I don’t know about you, but the truth is that I really am!
Welcome to the overconfidence effect.
Quite a few other biases are connected to this thinking error, like the optimism bias (see my newsletter #12), the planning fallacy (#13), the gambler’s fallacy (#18), illusion of control (#19), or the self-serving bias (#27). The problem with overconfidence is that it reinforces many other thinking errors.
To me it seems that this bias particularly loves the leadership level of organizations. What should not be a surprise: those who doubt too much and keep thinking that their own skills and competencies are not sufficient for the “next level” will stay where they are.
Overconfidence can be fueled by motivational phrases like “you only need to believe in yourself, and everything is possible” – implying that you need nothing more than a strong belief.
In his book The Psychology of Judgment and Decision-Making Scott Plous calls “overconfidence the most pervasive and potentially catastrophic of all the cognitive biases to which human beings fall victim. It has been blamed for lawsuits, strikes, wars, and stock market bubbles and crashes”. While it may be beneficial to individual self-esteem and give an individual the will to succeed towards a desired goal, too much of it is definitely not healthy. The only question is: what is too much? I must admit I don’t know the answer to this question.
Too little confidence is also not good. Insecure overachievers (how they are often called) combine the drive for success and acceptance with the feeling that they are not good enough, no matter what they do. I can well understand why many recruiters search for those people: You get “the best” in the sense that they are the ones who will put in the most effort. They constantly give. They bury themselves with work to get recognition for their wavering selves, to avoid negative feedback for their performance. But insecure overachievers are the perfect prey for the overconfident alphas in organizations. Both form an unhealthy symbiosis, a perfect synergy which can lead to even more damage than could be caused by the overconfident (underachievers) alone.
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Why does it happen?
I think the overconfidence effect would not be such a big problem if we weren't all constantly rewarding overconfident behavior.
Kahneman and Tversky describe this perfectly in their book Thinking, Fast and Slow: “An unbiased appreciation of uncertainty is a cornerstone of rationality – but that is not what people and organizations want. Extreme uncertainty is paralyzing under dangerous circumstances, and the admission that one is merely guessing is especially unacceptable when the stakes are high. Acting on pretended knowledge is often the preferred solution.”
How can we avoid it?
For me the most important thing is the mindset. If I can decouple confidence from the belief of being superior to others or knowing better than others, then I’m less prone to the negative side effects of the effect. I can be confident and show confidence while at the same time knowing that I have my weak spots, that I need help and advice from others. That my decisions might be wrong.
Why can’t we stop bothering about how we perform compared to some mathematical average? For example, I can be perfectly fine with being just about average or even below as a car driver. Today, with modern cars and well-built highways, average drivers cause far fewer serious accidents than the above-average drivers of the 1960s and 1970s. So, what’s the issue?
A wise man once said: If you want to become unhappy, start comparing yourself with others. If we stop this constant rat race to see who is best at what, we become much less susceptible to the overconfidence effect and its negative impact.
What’s your thinking around that?
Does this sound familiar to you? Any own experiences or stories you would like to share? Please start a conversation in the comments section!