When it comes to making decisions, one human factor matters than anything else—confidence. Even with sound data to support an argument, the decision maker’s confidence level is likely to play a major role. And one of the biggest decision-making mistakes is overconfidence. Psychologists Don Moore, of the University of California, Berkeley, and Max Bazerman of Harvard, call it “the mother of all biases” in their textbook on decision making. The Nobel prize-winning psychologist Dan Kahneman has said it’s the “most significant of the cognitive biases.”
Moore, who is also the author of Perfectly Confident: How to Calibrate Your Decisions Wisely, says you are likely to be thinking about confidence in the wrong way. The self-help movement has framed confidence as necessary for success; you should try to maximize your confidence. Maybe you think that having high confidence is a causal factor in success. But decision scientists know that overconfidence leads to an inflated view of your own abilities and knowledge (already distorted by the knowledge illusion), which can lead to over-use of erroneous intuitive judgements.
Minimizing confidence isn’t a solution either as under confidence is an error all its own. Under confidence leads to missed opportunity and regret for the “path not taken.”
Overconfidence comes in many forms, but overprecision is the most consistent and pernicious, according to Moore. Overprecision is what happens when you are excessively sure that you know the truth. The result: you think your interpretation of the facts is the right one. It brings out the worst in us, leading people to disparage others as stupid or having evil intent.
Data don’t necessarily solve this problem. As data represents a more complex world, is increasingly unstructured and can only be read by machine, the unit of evidence that represents “truth” paradoxically becomes less knowable by humans. For intuition to be useful rather than dangerous, you need to be skilled at your calibrating confidence.
There’s an easy test you can do that is helpful in understanding how you calibrate your confidence—here. This test can show you how calibration is a skill that can be learned. Calibrating well requires constant vigilance and self-reflection. In the face of constant temptation to indulge in wishful thinking or a comforting self-delusion, calibrating your confidence allows for not just better decision making but healthier and easier group dynamics. By assigning a probability to your level of confidence, you are more likely to keep your mind open to new ideas and to be a more collaborative leader.
Here are some simple tips to help keep your mind open to new evidence and ideas:
- Get in the habit of assigning probabilities to beliefs. Instead of using words (“it’s going to happen,” “it’s not going to happen”), assign a probability. The act of putting a number on an assertion helps shift subjectivity into objectivity, making it easier and less affronting to challenge an opinion.
- Do the same with “best guesses.” Rather than best guess a single point, turn the single point guess into a probability distribution.
- Add more options: most decisions are about whether to do something, meaning “each decision is a go/no-go choice.” Instead of these “whether” decisions, make them “which” decisions, by considering more alternatives before deciding.
- As a manager, be less “results focused,” which can, counter-intuitively, produce worse results because it can reward luck, incentivizes caution, penalizes the unlucky and discourages well-calibrated risk taking.
- Always ask “how can I be wrong.” Have everyone write down alternative causes and discuss alternative hypotheses.
Kahneman says that overconfidence is the bias he says he would most like to eliminate if he had a magic wand. But it “is built so deeply into the structure of the mind that you couldn’t change it without changing many other things”. This is the conundrum: overconfidence has helped make humans who we are as a species. Calibrating confidence isn’t a one-shot thing. Instead it’s an “always on” skill that pays off in better decisions.
This article is one in a series of hacks, tips and tricks for making better decisions.