Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 15, Issue 15;   April 15, 2015:

Overconfidence at Work

by

Confidence in our judgments and ourselves is essential to success. Confidence misplaced — overconfidence — leads to trouble and failure. Understanding the causes and consequences of overconfidence can be most useful.
Deputy Secretary of Defense Wolfowitz, Defense Secretary Rumsfeld, and President Bush in a press conference on September 17, 2001

Left to right, Deputy Secretary of Defense Paul Wolfowitz, Defense Secretary Donald H. Rumsfeld, and President George W. Bush, conduct a press conference on September 17, 2001, at the Pentagon. They had met to continue planning an appropriate military response to the al Qaeda threat. They held a press conference after the meeting. Certainly, over the months and years following, this team and many other members of the administration underestimated the scale of the problems they faced. Mr. Wolfowitz, in particular, expressed views far more optimistic than — and contrary to — the evidence-based views of many experts. One of his most often quoted comments about the cost of the Iraq War is that in the case of Iraq, the United States is dealing with "a country that can really finance its own reconstruction and relatively soon." Defense Department photo by R. D. Ward.

Overconfidence is the state of having too much confidence — confidence beyond levels justified by evidence. One trouble with that definition is that it provides little useful insight: how much is too much? A second trouble is that it exemplifies itself, in that it presumes that levels of confidence can be assigned with, um, confidence. Often we can do no such thing. Situations affected by overconfidence include hiring, making strategic choices, chartering projects, cancelling projects — indeed, most workplace decision-making. Despite the vagueness of the concept of overconfidence we can make useful conclusions, if we examine the concept more closely.

That's what Don Moore and Paul Healy did in a 2008 paper — cited in over 800 other works (according to Google Scholar), which is a goodly number for such a short time. The authors note that conflicting results in overconfidence research can be resolved when one realizes that the term overconfidence had been used to denote three different classes of judgment errors. They are:

  • Overestimation: assessing as too high one's actual ability, performance, level of control, or chance of success.
  • Overplacement: the belief that one is better than others, such as when a majority of people rate themselves "better than average."
  • Overprecision: excessive certainty regarding the accuracy of one's beliefs.

These tendencies are not character flaws. Rather, they arise from the state of being human — not in the sense of "to err is human," but, as a direct consequence of human psychology.

What is surprising is how little we do in organizations to protect ourselves and the organization from the effects of overconfidence. Indeed, some of our behaviors and policies actually induce overconfidence. Here are three examples.

Unrealistic assessments of the capabilities of others
A phenomenon known as the Dunning-Kruger Effect causes us to confuse competence and confidence. [Kruger 1999] That is, we assess people as more capable when they project confidence, and inversely, less capable when they project uncertainty. This can lead to decision-making errors in hiring, and in evaluating the advice we receive from subordinates, consultants, experts, and the media.
Unrealistic standards of precision
When we Situations affected by overconfidence
include hiring, making strategic choices,
chartering or cancelling projects —
indeed, most workplace decision-making
evaluate projected performance for projects or business units, we require alignment between projections and actuals. The standards we apply when we assess performance typically exceed by far any reasonable expectations of the precision of those projections. This behavior encourages those making projections to commit the overprecision error.
Unrealistic risk appetite
Assessments of success in the context of risk, and our ability to mitigate risk, are subject to overestimation errors. By overestimating our chances of success, and our ability to deal with adversity, we repeatedly subject ourselves to higher levels of risk than we realize.

Cognitive biases that contribute to overconfidence in its various forms include, among others, the planning fallacy, optimism bias, illusory superiority, and, of course, the overconfidence effect. Most important, the bias blind spot causes us to be overconfident about the question of whether we ourselves are ever overconfident. We surely are. At least, I think so. Go to top Top  Next issue: Quips That Work at Work: I  Next Issue

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For an extensive investigation of the role of overconfidence in governmental policies that lead to war, see Dominic D. P. Johnson, Overconfidence and War: The Havoc and Glory of Positive Illusions, Cambridge, Massachusetts: Harvard University Press, 2004. Order from Amazon.com.

For more about the Dunning-Kruger Effect, see "The Paradox of Confidence," Point Lookout for January 7, 2009; "How to Reject Expert Opinion: II," Point Lookout for January 4, 2012; "Devious Political Tactics: More from the Field Manual," Point Lookout for August 29, 2012; "Wishful Thinking and Perception: II," Point Lookout for November 4, 2015; "Wishful Significance: II," Point Lookout for December 23, 2015; "Cognitive Biases and Influence: I," Point Lookout for July 6, 2016; "The Paradox of Carefully Chosen Words," Point Lookout for November 16, 2016; and "Risk Acceptance: One Path," Point Lookout for March 3, 2021.

Footnotes

[Kruger 1999]
Justin Kruger and David Dunning. "Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments," Journal of Personality and Social Psychology, 77:6 (1999), 121-1134. Available here. Back

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