By Khatera Sahibzada Ph.D. 

Confidence is arguably one of the most highly rated leadership virtues. But too much of it can be catastrophic, particularly when it comes to judgment and decision-making. Research has found negative implications of an overconfident leader on organizational performance such as introducing risky products that are unlikely to be successful to poor decisions about mergers and acquisitions. The foremost thought leader in decision-making, Daniel Kahneman, singles out overconfidence as the bias he would eliminate if he had a magic wand.

Despite these findings, overconfident people attain higher social status and are viewed as more competent allowing them to reap the reputational benefits. “Confidence makes individuals appear more competent in the eyes of others, even when that confidence is unjustified and unwarranted,” says Cameron Anderson from Berkeley’s Haas School of Management. Overconfidence undeniably wields a great deal of influence. The question is, why?According to psychologist and author, Maria Konnikova, “Human beings don’t like to exist in a state of uncertainty and ambiguity.” Confident people give off an air of assurance and certitude and are perceived as being competent which makes us an easy target to influence. In fact, emerging research has identified a particular area in the brain that responds to confidence, the ventromedial prefrontal cortex (vmPFC), an area involved in emotional regulation.

Types of Overconfidence

Overconfidence can come in many forms, the three most common being overestimation, overplacement, and overprecision. Overestimation is believing that you are better than you actually are. Overconfident people erroneously believe that they are more effective than they actually are. This is seen from the boardroom to the golf course, where CEOs over-estimate their ability to generate returns,  and golfers of all levels believe they will be able to hit the ball farther than they actually do.Paradoxically, people tend to overestimate their performance on tasks that are hard and underestimate their performance on easy tasks, known as the hard-easy effect.

Taking it one step further, overplacement is the belief that you are better than others – more talented, smarter, less biased, more competent, even better drivers – even though you may not be. Overprecision is believing with complete certainty the accuracy of your judgments. This is the most robust form of overconfidence with a wide reach: it’s seen across “cultures, professions, genders, ages and levels of expertise.”