119. Making good decisions: Overconfidence

Overconfidence is my "favourite" of the Heath Brothers' four villains of decision making. It's simultaneously super obnoxious and super universal. And boardrooms provide the perfect environment for overconfidence to thrive and get in the way of your decisions. Background music is Of the Stars by KC Roberts & the Live Revolution ADDITIONAL RESOURCES: Freakonomics Radio Season 9, Episode 46 Gender Differences in Overconfidence and Decision-Making in High-Stakes Competitions Gender Differences in Performance Predictions: Evidence from the Cognitive Reflection Test The Power of Precise Predictions   SCRIPT Maybe “favourite” isn’t the perfect word here, but I’ll say it anyway: overconfidence is my favourite of the Heath Brothers’ four villains of decision-making. It’s so complex, insidious, unconscious, and nearly ubiquitous. Overconfidence even FEELS good, so…well, it’s pretty hard to steer completely around it in group decision environments like boardrooms. Take some time to scan the academic literature on overconfidence, including awesome recent stuff by Philip Tetlock from University of Pennsylvania, and the amazing book “Range” by David Epstein. Basically, it turns out that the more expertise you have in a specific field, the worse you get at making predictions about that field…and the more confident are at making those bad predictions. Another messed up thing about overconfidence? It’s deeply gendered. Men, unsurprisingly, fall victim to overconfidence far more readily than women – hence the tendency to “mansplain.” Women, on the other hand, are more likely to be victims of UNDERconfidence, which as you can imagine also impedes effective decision-making. I’ve put some interesting links in the episode description for you to check out if you want to see more of the research in this area. People usually become corporate directors specifically because they have deep expertise in some area or another. So, as experts, how can we be useful in the boardroom without inviting the villains into the mix? My best advice is to lean on your expertise to ask big questions, tell cool stories, start interesting conversations…instead of just telling people what you think the future holds. No matter how confident you feel.