Too Much of a Good Thing? The Perils of Overconfidence

By September 3, 2020ISDose

Confidence is Don Moore’s self-professed “singular obsession.” To be more specific, Moore, a management professor at the Haas School of Business at the University of California, Berkeley, who specializes in the psychology of decision-making, is preoccupied with overconfidence. Why do people sometimes think they’re more talented, smarter or more successful than they actually are? Why do they think they’re better than other people? Why are they so adamantly sure they’re right?

 Moore explores all of these questions and more in his new book Perfectly Confident. Recently, he spoke with Wharton operations, information and decisions professor Katherine Milkman about the important distinction between confidence and overconfidence, how the overconfidence of U.S. leaders is affecting the outcome of the COVID-19 pandemic in the country, and how we can avoid falling prey to overconfidence.

An edited transcript of the conversation follows.

Katherine Milkman: It feels great to be overconfident, so why shouldn’t we always try to feel that way and go into everything we do with this optimism?

Don Moore: That is such an interesting question. My answer focuses in on the distinction between confidence and overconfidence. It feels good to be confident. It doesn’t feel good to be overconfident. Overconfidence comes from comparing your beliefs with reality. And when you realize you’re overconfident, it feels like a mistake. You feel like a fool.

What feels good is confidence. Most notably, when it’s backed by the facts. When reality supports that faith, that’s when your confidence is most empowering, most satisfying and most enjoyable.

I would also note that there is an important psychological disconnect between our feelings of empowerment and self-efficacy, and our actual abilities. There are ways for us to feel good about who we are and what we accomplish and what we’ve done that are independent of our actual accomplishments. There are tremendously successful and accomplished people who go through life feeling dissatisfied, frustrated and inadequate. And there are people of the humblest accomplishments who go through life feeling good about themselves and proud of what they’ve done.

My admonition in the book to gather good evidence and calibrate your confidence is not an admonition to feel bad about yourself. Where there are choices to be made about whether you feel good or bad about your achievements and your abilities and your lot in life — feel good about it. If that means remembering how fortunate you are and how much you’ve done relative to what you might have accomplished — feel good about that. But that doesn’t mean lie to yourself about how much money is in your bank account or how large a chasm you can jump or how many people will buy your book.

Milkman: I want to talk about a very timely topic. In your book, you describe the human tendency to be overconfident. How does that affect the way we handle uncertainty like what we’re currently experiencing with the COVID-19 pandemic?

Moore: I think the current global cataclysm we’re experiencing underscores the profound risks of overconfident beliefs. If our nation’s leaders had been somewhat less confident about our country’s ability to withstand this pandemic, maybe we would have been better prepared. I’m sure you saw the news on how if we had moved to keep physical distance from one another just a week earlier in March, we would have saved tens of thousands of lives.

So, our current predicament underscores some of the risks of delusional overconfidence. Being too confident about our preparation for a risk like a pandemic is not, in aggregate, helpful, when it makes you more vulnerable. The students in my class who are most sure they’re going to ace the exam, and therefore don’t study, are not those who get the best grades.

“Many of us wind up in this awkward trap trying to predict the future, as if we could know for certain what was going to happen, or how we would perform, or how others will behave. We can’t.”

Having realistic expectations about the risks and opportunities that lie ahead and the actions you need to take now to protect yourself from risks or to prepare yourself to capitalize on opportunities, is enormously helpful for achieving what you want in life.

Milkman: That’s a perfect segue to the last question I want to ask you, Don. What advice can you give us about how we can calibrate our confidence better?

Moore: There are lots of tools, many of which I elaborate at great length in the book. I’ll just mention one: Think probabilistically about the uncertainties inherent in the future. Many of us wind up in this awkward trap trying to predict the future, as if we could know for certain what was going to happen, or how we would perform, or how others will behave. We can’t. The best we can do is make probabilistic forecasts, considering the distribution of possible outcomes and trying to assess the likelihood of each of them.

Annie Duke, in her book Thinking in Bets, encourages people to calibrate their confidence by asking, “Wanna bet?” We can discipline our forecasts for the future by thinking about putting stakes on them. Do I believe that prediction enough to be willing to bet on it? How likely do I think it is? And if there’s someone else willing to take the other side of that bet, what do they know that I don’t? That leads to the very useful question, “Why might I be wrong? What information out there suggests I’m wrong? Or what do others who believe differently know that I don’t?” That is very useful for helping us question our assumptions and calibrate our confidence.

Guest Author: Knowledge@Wharton Author

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