Imagine a world where people lacked confidence. We would scarcely be able to face a new day, struggling to summon the courage to show our work to our bosses or apply for a new job. Surgeons would be racked with doubt about upcoming operations. Military commanders would hesitate at key moments when decisiveness was essential. Politicians would be unable to defend their views against the constant hail of personal and intellectual criticism.
Confidence is so vital even for the mundane activities of everyday life that we take it for granted. But it also looms large whenever we try to explain achievements that are out of the ordinary. Confidence is widely held to be an almost magic ingredient of success in sports, entertainment, business, the stock market, combat and many other domains—would Donald Trump, Muhammad Ali, and General Patton have risen to fame without their sizzling confidence? No way.
At the same time, confidence can be dangerous. Like fire, it can be extremely useful in controlled amounts, but confidence in excess—overconfidence—can easily burn out of control and cause costly decision-making errors, policy failures, and wars. For example, overconfidence has been blamed for a string of major disasters from the 1990s dotcom bubble, to the 2008 collapse of the banks, to the ongoing foot-dragging over climate change (“it won’t happen to me”). These events are no blip in the longer timeline of human endeavor. Historians and political scientists have blamed overconfidence for a range of fiascos, from the First World War to Vietnam to Iraq.
We may be surprised by the recurring problem of overconfidence—why don’t people learn from their mistakes? As the archetypal self-doubter Woody Allen suggested, “Confidence is what you have before you understand the problem.” But the recurrence of overconfidence is no surprise to psychologists.
All mentally healthy people tend to have so-called “positive illusions” about our abilities, our control over events, and our vulnerability to risk. Numerous studies have shown that we overrate our intelligence, attractiveness, and skill. We also think we have better morals, health, and leadership abilities than others. A survey of 1 million high school students showed that 70 percent think they are above-average leaders (only 2 percent rated themselves below average). In another study 94 percent of college professors claimed that their research was above average. We believe we will live longer than others, and we will avoid common calamities like car accidents, crime, earthquakes, and major illness. Like the children in Garrison Keillor’s Lake Wobegon, we are all above average.
Positive illusions appear to be undergirded by many different cognitive and motivational biases, all of which converge to boost people’s confidence. This is dangerous because people are more likely to think they are better than others, which makes aggression, conflict, and even war more likely. As psychologist Daniel Kahneman put it: “The bottom line is that all the biases in judgment that have been identified in the last 15 years tend to bias decision-making toward the hawkish side.”
Confidence thus poses a major puzzle. On the one hand, overconfidence appears to be a widespread and powerful feature of human cognition, but on the other hand it appears to cause faulty assessments and major disasters. That makes little sense. Why would this kind of false belief survive in competition with accurate beliefs? How could it even have evolved in the first place?
The beginnings of a solution suggest themselves at the point where we started, with the good things that confidence brings. As Michael Jordan said, “You have to expect things of yourself before you can do them.” If confidence allows us to set expectations, then overconfidence might work as a kind of self-fulfilling prophecy, helping us to achieve even more. Consider the fantastically self-confident Muhammad Ali, who said he “never even thought of losing” and even at school “boasted weekly—if not daily—that one day I was going to be the heavy weight champion of the world…. When I proclaimed that I was the Greatest of all Time, I believed in myself. And I still do.”
Overconfidence may therefore be advantageous because it increases ambition, resolve, and persistence in many of life’s tasks—even if the price of maintaining this overconfidence is occasional disasters. Just as successful poker players must sometimes bluff the strength of their hand if they are to win, overconfident individuals may be able to outperform their rivals if they believe in themselves enough to keep going when others would give in.
The idea that overconfidence is advantageous is interesting. But it has remained just that—an idea. There always lurks a compelling alternative hypothesis: While overconfidence might indeed encourage us to aim high, it is nevertheless a decision-making error. Consequently, many economists argue that the winning strategy ought to be one that sees the world exactly as it is, coldly calculating our capabilities and picking only fights that we are sure to win. This Homo economicus model still dominates economics and other corners of the social sciences.
How can we adjudicate between these two alternative views? An evolutionary perspective is useful here because it forces us to think through how these alternative strategies would fare in direct competition with each other—which ones would survive Darwin’s mill of natural selection? Imagine a world in which there are three types of individuals: economists (who are unbiased), Muhammad Alis (who are overconfident—okay, he was the greatest, but it’s a good label), and Woody Allens (who are underconfident). If these guys are competing for food, the Woody Allens will shy away from conflict, which helps them avoid costly confrontations. But it also means they might starve. The economists will have a better idea about which conflicts they can win, and so they won’t be quite so scrawny. But uncertainty about the outcome of any one conflict means they will occasionally leave food on the table that they could have claimed and won. In contrast, the Muhammad Alis of the world rarely back down from a fight, and therefore they always have a shot at eating and surviving. As long as the value of eating is sufficiently greater than the cost of conflict, the Muhammad Alis will win the day.
Hence, a degree of overconfidence can be beneficial on average, even if it causes occasional disasters. As long as the prize at stake sufficiently exceeds the cost of competing for it, fortune favors the bold.
There is, however, going to be some optimal margin of overconfidence: Unbounded overconfidence will be detrimental. Blind willingness to fight—especially when two such strategies meet—can lead to so much conflict that no gain will be worth it. Napoleon’s attack on Waterloo in 1815 and the banks’ subprime-lending practices in 2008 both eventually pushed the limits of confidence too far. In fact, if the costs of competition become extreme, outweighing the potential gain, underconfidence becomes the best strategy (even Ali would leave the ring if his opponent pulled out a machine gun). Although this situation may be rare (people usually compete precisely because a prize is greatly valued), Woody Allens may be better suited to a world in which technology changes the odds and a miscalculation can mean the collapse of the global banking system or the unleashing of a mushroom cloud.
So how can we use these ideas to raise ambitions while reining in disaster? The problem is that it’s never obvious how much confidence is the right amount. In life, love, finance, and politics, there’s a fine line between losing out when we could have won and getting burned by pushing too hard.
But there is one general lesson from evolution that helps us identify when overconfidence is likely to lead us astray. Our judgment and decision-making mechanisms evolved to deal with the adaptive problems of our evolutionary past, not with the problems of our modern social and physical world. Our brains developed over millions of years, during much of which we lived in small kin groups of hunter-gatherers. It is only in the past 10,000 years that we began living with strangers in large urban societies, organizing ourselves into hierarchical political units, and operating complex machines and lethal weapons. Although overconfidence may often continue to help us just as evolution intended—in relevant contexts and settings—it has a powerful and pervasive evolutionary legacy that continues to dominate our judgment and decision-making, even in complex political, social, or technological settings when such overconfidence is far less likely or able to bring any advantages and simply increases the chance of disaster.
We can predict, therefore, that overconfidence is most likely to help in “evolutionarily salient” contexts that are similar to the adaptive challenges of our past, such as individual combat like boxing. It is least likely to help in “evolutionarily novel” contexts—such as sitting at a desk in a bank guessing the behavior of 100 million strangers, or commanding thousands of invisible troops from an underground bunker.
The good news is that evolutionary reasoning suggests ways to avoid the most dangerous situations in which overconfidence is likely to arise. First, we can make sure that overconfidence is nurtured in settings where a go-getting attitude helps performance (such as sports), and suppressed in settings where accurate assessment is more important than will (such as global climate change). Second, we can target the underlying contexts that make or break overconfidence. For example, notice that we exhibit overconfidence only when we are not sure who will win a fight. This suggests that we should be encouraging as much information sharing as possible—the more interaction we have with our opponents, the more likely we are to agree on the strengths and weaknesses of each side. This is precisely the reasoning underlying recent calls for mutual inspections of nuclear arms facilities between Russia and the US.
There are also implications for the way we design our decision-making institutions. The lesson from the banks is that, left unchecked, overconfidence can become self-reinforcing and almost immune to correction—only confident personalities get the jobs, only big risk-takers make big returns, and only those with big returns move up the ladder to the top of the firm. And the bonuses are back already! As much as one may like free markets, the only sure way to counter strong incentives for risk-taking is getting external regulation right.
We all benefit from the ambition that populates the world with Michael Jordans and Muhammad Alis—what crazy guy hatched the idea of flying, or going to the moon? Human achievement is a thing of great beauty.
But overconfidence is an increasingly dangerous strategy today. The modern world is very different from the one in which we evolved, and to which our decision making and behaviors adapted via natural selection. The big decisions of today are dependent on multiple and complex interacting bureaucracies and stakeholders, in which accurate assessments and painstaking planning may be boring but are critical to success—an evolutionary novelty we are not “designed” for. Political and economic overconfidence are therefore all the more important because they are more likely to be misplaced and yet also to have implications for millions. We may not be able to eliminate this bias in our decision-making, but it is crucial that we understand it and reset our institutions accordingly if we are to shake our long record of self-imposed disasters.
James Fowler is a political scientist at the University of California, San Diego and author of Connected: The Surprising Power of Social Networks and How They Shape Our Lives. Dominic Johnson is a reader in politics and international relations at Edinburgh University, Scotland.
Originally published January 7, 2011