Confidence and Overconfidence

Confidence is infectious. Someone who speaks with total certainty is more likely to inspire than someone who is hesitant. A study analyzed the language used in letters from investors. It found that more confident letters were associated with more successful commercial co-operations.

Confidence—even overconfidence—can also lead to higher status. In a 2012 study, MBA students were asked to take an online survey. The questionnaire asked them if they knew certain names, events and works of art. They didn’t know that some of the choices were made up. At the end of the term, classmates rated the overly confident students—those who had picked the most fictional entries—as the most influential.

As much as confidence brings rewards, however, it also brings danger.

One study found that overconfident bosses were more likely to buy other companies. These purchases were also more likely to fail. Another paper looked at the link between CEOs’ confidence and their earning forecasts. Researchers found that bosses with too much self-belief were slower to adjust their forecasts when they were wrong. Simply put, overconfident bosses stayed wrong for a longer time.

This leads to two broad suggestions for managers to reflect on. First, overconfident people need clear rules. A newspaper found that puffed-up bosses at high-tech firms had a better record of making breakthrough innovations if they were watched by powerful and expert boards. Second, self-doubters need encouragement to fulfil their potential. This support can come from managers, advisors, or even from themselves. Studies showed that when people were reminded of their own power, they performed better in interviews and presentations. Confidence can be natural. It can also be stimulated.