consulting, Daniel Kahneman, hotel, knowledge worker, management, Northern California, retail, small business, smb, start up
I recently touched on the notion that most organizations encourage, and even pressure, members to display confidence. To expand, I’d like to summarize some of Daniel Kahneman’s, work in Thinking, Fast And Slow because it has a lot to say to executives. In a nutshell, overconfidence can cause a world of hurt if we misunderstand how it works in decision making vs. how it works in implementing a course of action.
In decision making, overconfidence leads to a host of potential problems. First of all, we forget how little we really know about any given situation and we overestimate how much control we have over our environment. This alone creates a tendency to take more risk than we realize or should. Then, compound it with norms surrounding executive behavior. Imagine how successful Marketing Executive A would be if she were to admit how little she and her team really know about market trends over the next five years. Compare that to Executive B who confidently tells a very coherent and compelling story about how events will unfold over the same timeframe, backing up his story with selected information, imagery, and the swagger to match. Even if both executives were completely aware that each knew very little, still they would usually be penalized for admitting it. Because most organizations prize the stories of overconfident experts it leads them to take much riskier positions than a more thoughtful decision making approach otherwise would; where everyone is heard from and all must support their opinions with facts.
In implementation, however, confidence and optimism are true friends because they increase our resiliency. Even excellent and/or lucky decisions require implementation, and things never seem to go smoothly. We encounter setbacks. Funding comes in fits and starts. We lose or transition key personnel. Competitors react or anticipate our moves.
Confidence and optimism are essential to weather the ups and downs of putting our decisions into action but should be regarded skeptically when making those same decisions.
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