Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 22, Issue 4;   February 2, 2022: The Risk of Astonishing Success

The Risk of Astonishing Success

by

When we experience success, we're more likely to develop overconfidence. And when the success is so extreme as to induce astonishment, we become even more vulnerable to overconfidence. It's a real risk of success that must be managed.
Children playing a computer game

Children playing a computer game. Both appear to be having a great time, having achieved astonishing success.

To be overconfident is to have a greater sense of confidence in one's talents, ability, or judgment than is justified. Overconfidence can be a general condition, or it can be relative to particular circumstances. In any case, the overconfidence effect is a well-known cognitive bias that causes us to make errors when assessing our own abilities. Some innovative experiments have indicated that a string of recent successes can increase the degree of overconfidence one exhibits. [Hilary 2011]

That finding suggests that overconfidence and the overconfidence effect present real risks to organizations, where it is common practice to allocate increasingly important responsibilities to people who have had recent successes. That's why it struck me as important to contemplate a subset of those risks — the risks of astonishing successes.

Those risks arise from interactions among several cognitive biases. Self-serving bias causes us to attribute success to our own abilities, and to attribute failures to external factors. Hindsight bias is our tendency to perceive past events as having been more predictable than they were. Confirmation bias causes us to seek out information that confirms our preconceptions, rejecting information that would tend to disconfirm those preconceptions. [Nickerson 1998]

And it's reasonable to suppose that rational decision-making is most at risk from these biases when emotions are strong and the situation is relatively chaotic. The central enabler of interaction among these cognitive biases is astonishment, which leads to the emotions and chaos to which rational thought can be so vulnerable.

In what follows I use the term actor to refer the person (or organization) that has experienced a string of astonishing successes. The story below sketches how self-serving bias, the overconfidence effect, hindsight bias, and confirmation bias can conspire to expose the actor to elevated risk of failure when the actor has experienced a string of astonishing successes. We begin with self-serving bias.

Self-serving bias

Self-serving bias distorts interpretations of success and failure. It causes us to tend to interpret successes as direct results of our talents and abilities. And it causes us to tend to interpret failures and troubles as results of external factors.

Self-serving bias thus establishes a framework in which the search for explanations of astonishing success tends to focus on the actor. That focus reduces the likelihood that the actor will appreciate the importance of external factors in producing the success.

The overconfidence effect

The overconfidence Rational decision-making is most
at risk from cognitive biases when
emotions are strong and the
situation is relatively chaotic
effect causes us to commit errors of three kinds. First, we tend to overestimate the quality of our own performance. Second, we tend to rate our own performance as higher than it actually is relative to the performance of others. And finally, we tend to underestimate the uncertainty of our beliefs — that is, we have excessive confidence that we know the truth.

Experimental evidence for these effects is strong — the overconfidence effect has been observed in a wide range of circumstances. We don't need to place ourselves under special circumstances of stress or challenge or misinformation to induce overconfidence. Just as walking consumes calories, being human occasionally leads to overconfidence. And a string of successes increases the likelihood that we will exhibit overconfidence.

The overconfidence effect thus establishes tension between the feeling of superior capability and the astonishment arising from the success. In words, the question arises, "If I am as capable as I believe I am, why am I so surprised at my success?" The desire to resolve that tension causes us to search for an explanation. And that search makes us vulnerable to the next cognitive bias of the story: hindsight bias.

Hindsight bias

Hindsight bias, also known as the knew-it-all-along phenomenon, is the human tendency to perceive past events as having been more predictable than they actually were. [Roese 2012] In a real sense, hindsight bias is a form of overconfidence in one's ability to predict how a situation will evolve with time. Hindsight bias might arise from the superiority of our ability to recall the chain of events that occurred compared to our ability to recall the sometimes-complex and changing contexts in which that chain of events occurred.

When we experience a string of successes, we gain a sense of confidence. But occasionally the successes are so unusual that they create a sense of astonishment. That emotion can disrupt not only our view of the circumstances in which the success occurred, but also our view of ourselves. An unsettling question arises: How did this happen? Finding answers can be challenging when we recall so little about the effects of then-contemporary circumstances.

Self-serving bias causes us to tend to discount the effects of those circumstances, leading is to interpret the successes as direct results of our talents and abilities. Given that understanding of what happened, hindsight bias causes us to observe, "I knew I was good at this!" But then a problem arises.

The effects of astonishment

Surprise, the emotion we experience when something unexpected occurs, has a three-fold role in hindsight bias. [Müller 2007] First, we use surprise to estimate the degree of conflict between what we would have predicted and what actually occurred. Second, surprise triggers the processes we use to make sense of what did happen. Sense-making is a step necessary for adjusting our understanding of the world. Finally, surprise biases the sense-making process to help us pick out the factors that we missed or undervalued in the process of predicting what would have happened. When time and emotion and resources permit, these three roles collaborate to help us make predictions more accurately.

Astonishment is an extreme form of surprise. Astonishment is more likely than mere surprise to instill emotions like fear, wonder, or awe. An example of a surprise is the emotion you experience upon finding an extra bag of fries in your fast food order, or when you find that you won $25 in a lottery. An example of astonishment is the feeling you might experience upon discovering that your home has been burglarized, or that a distant relative, recently deceased, has bequeathed you the equivalent of a two years of annual earnings.

From astonishment to doubt

Astonishment at a success causes us to ask, "How did I not know I was this good?" Or, "If I didn't know I was this good, am I really good?" And that is a most discomfiting question. Doubt enters the scene.

The doubts raise questions about the validity of the superiority premise — the premise that the actor has superior talent, capability or judgment.

To resolve the doubts, a search of records and recollections begins. If the search is formal, it's called a retrospective, an after-action review, a lessons-learned session or something similar. But formal or not, the search is vulnerable to another cognitive bias — confirmation bias. Confirmation bias tends to focus the search on items that confirm the superiority premise. And the search will likely be successful, because, after all, the actor's effort was a success.

Elevated risk

Risk becomes elevated after astonishing success because the impression created by the search for explanations can produce a severely distorted assessment of the superiority of the talent, capability, or judgment of the actor. The search becomes a search for overlooked clues as to superior capability instead of a search for overlooked external reasons for success. The result can be a form of overconfidence as exaggerated as the success was astonishing. Go to top Top  Next issue: Defect Streams and Their Sources  Next Issue

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Footnotes

Comprehensive list of all citations from all editions of Point Lookout
[Hilary 2011]
Gilles Hilary and Charles Hsu. "Endogenous overconfidence in managerial forecasts." Journal of Accounting and Economics 51:3, (2011), p.300-313. Available here. Retrieved 17 January 2022. Back
[Nickerson 1998]
Raymond S. Nickerson. "Confirmation bias: A ubiquitous phenomenon in many guises," Review of General Psychology 2:2 (1998), 175-220. Available here. Retrieved 22 April 2021. Back
[Roese 2012]
Neal J. Roese. "'I Knew It All Along…Didn't I?' — Understanding Hindsight Bias", Association for Psychological Science blog, September 6, 2012. Available here. Retrieved 18 January 2022. Back
[Müller 2007]
Patrick A. Müller and Dagmar Stahlberg. "The role of surprise in hindsight bias: A metacognitive model of reduced and reversed hindsight bias," Social Cognition 25:1, (2007), 165-184. Available here. Retrieved 18 January 2022. Back

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