I don’t exactly know where does this come from but have you caught yourself feeling overconfident in what you do or say, even when it’s not 100% earned?
Overconfidence is when you think you can pull things off and it turns out the exact opposite. During these times you think so highly of your skill or knowledge or abilities, and it’s a natural instinct.
“Overconfidence Effect” is the opposite of “Imposter Syndrome”. Both indicate imbalances, which is exactly why it’s hard to keep your thoughts about yourself in check; just high enough to help you seal, but not too far such that you are perceived as a fraud or whatever.
“Imposter Syndrome” is another word to feeling under-confident, nobody benefits from that; if you’re under-confident, you’re losing everyday because there’s no amount of skill or knowledge that can make up for it. If you can’t sell what you already have, it will not get better if you got more. Overconfidence on the other hand is just an effect you suffer from when you get high on an achievement. It’s not equally as bad, but it’s bad; both can harm your career & relationships.
Overconfidence tends to appear more among those who are more expert in their fields. If asked to forecast oil prices in five years’ time, an economics professor prediction can be as wrong as a zookeeper’s. However, the professor will offer his forecast with certainty.
Entrepreneurs and those wishing to marry also deem themselves to be different, they believe they can beat the odds. In fact, entrepreneurial activity & marriage rates would be a lot lower if the overconfidence effect did not exist. For example, pay attention in your local area to how frequent new restaurants are being established, even though statistics show that most restaurants close their doors after just three years. It’s extremely draining to keep this type of business running and profitable; the return on investment in the restaurant business lies chronically below zero. Yet owners often think they can beat the odds.
It’s not about being optimistic, but about being not realistic enough. Those with a direct interest in a project have an incentive to underestimate the costs. Think about it, hardly any major projects exist that are completed in less time and lower cost than forecasted. We systematically overestimate our knowledge and our ability to predict.
“What makes the overconfidence effect so prevalent and its effect so confounding is that it is not driven by incentives; it is raw and innate.” – Rolf Dobelli in The Art of Thinking Clearly
Overconfidence & Procrastination
When can the Overconfidence Effect harm -or even halt- your progress?
In a remarkable scene in 2014’s Whiplash, J.K. Simmons says “There are no two words in the English language more harmful than good job”. And it makes sense because we are procrastinators by instinct. If you’re procrastinating on some project, you’ll mostly be thinking you can sure get it done, and if it’s sure to be done, then why is the hurry? You trick yourself into thinking it’s just a small stretch to the project’s timeline, but in reality what happens after some time is you may lose interest or lose inspiration or any of a 1000 other things that may cause the project to stop.
Similarly, overconfidence can make you procrastinate on your life’s timeline. Because you’re sure of your abilities, you have proof and you have achievements, you know what to do! But it’s a trap, because negative knowledge (what not to do) is much more potent than positive knowledge (what to do), and negative knowledge is something you can’t get unless you’ve been through it (first-hand experience), and you can’t get through it if you kept on procrastinating. That’s why overconfidence is more of an enemy than an ally.
Strategic Misrepresentation
Another hidden symptom of the Overconfidence Effect is something called “Strategic Misrepresentation”. It’s when you bet so high on your abilities in advance because of what’s at stake.
Imagine you’re a book writer who haven’t written in years. You have a great idea for a new book, then you found a publisher who is willing to pay a nice advance, and now he needs to know your timeline. “Consider it done” you answer. Of course you don’t lie, but you know you may not get the advance if you said any other thing. However, behind close doors you know you might need lots of time for drafting, writing, proof-reading, etc. The official term for such behavior is “Strategic Misrepresentation”: the more at stake, the more exaggerated your assertions become.
When unique attempts are involved, strategic misrepresentation might be worth a try. Why? Because for example, if you’re interviewing with some company, you aren’t getting hired several times, it’s either a yes or no.
Most rising startups straight out lie about their numbers to investors. At the end, sealing a deal is a unique attempt, so many are open to misrepresent how their business is doing because they know they have what backs up the claim. It’s a high bet, an overconfidence effect.
Oxford professor Bent Flyvbjerg calls this “Reverse Darwinism”: “Whoever produces the most hot air will be rewarded with the project”. Why are cost and schedule overruns so frequent? Because it is not the best offer overall that wins; it is whichever one looks best on paper.
Now is this a type of deceit?
No, because it’s socially acceptable. In many cases, strategic misrepresentation is harmless, so we don’t get so worked up about it. And in other cases when we find out about it, we subconsciously blame it on external factors, because our judgement is often skewed when we’re dealing with the overconfident. It’s not that big of a deal, but just be on your guard for things that matter, such as your health or your future.
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