Overconfidence Often Overturns Olympian Organisations

Overconfidence Often Overturns Olympian Organisations

So In the Current Stormy Business Environment

To Boost Your Real Clout, Call-out Doubt

"The line between confidence and overconfidence is as thin

as a spider's thread."*

 

 

Doubt is considered a derogatory word and a decelerator of success. But if you rush with rocket speed, without any doubt, it could lead to overconfidence and a sense of infallibility resulting in a crash.

That is why a great philosopher like Rene Descartes said: “Doubt is the origin of wisdom”. He explains it further: “Doubt is the first step in gaining knowledge; without it, we could not progress. Doubt means we are questioning our beliefs and are prepared to learn new things. It also means we are willing to look for new options to improve our lives.”

Andrew Grove, the erstwhile CEO of Intel, goes  a step further and avers “ONLY THE PARANOID SURVIVE”. That is the title of his best-selling book. The word paranoid is far more derogatory than doubt. He emphatically says, “I believe in the value of paranoia which he defines as ‘it is a point in the life of a business when its fundamentals are about to change.” He calls it an INFLECTION POINT. It is critical because “business success contains the seeds of its own destruction.”

Grove appeals that “the fear of a new event sneaking up on us should keep us on our toes”. Therefore, “Every manager in every industry must assume that something will change - very soon. Only the paranoid will survive is classic lesson in leadership skills that every manager ca benefit from.”

 

You think we are exaggerating the overconfidence epidemic? Here is the proof according to a Google Overview - “while no single survey has determined a universal percentage of ‘overconfident’ people, decades of psychological research consistently show that a majority of the population exhibits overconfidence biases. A 2024 study of over 2000 UK adults found that 81% were overconfident.” 

 

Cases of Overconfidence in Business

There are several cases of setbacks and personal and corporate failures, some of gigantic proportions, due to overconfidence.

90% Startup Failures 

There are confirmed well-documented studies about the shocking 90% startup failure rate. The reason, unsurprisingly, is the tendency to ‘burn money’ for quick success. Yes, the ‘rate of burning cash’ is now a measure of management dynamism! It shocked the late business magnate, Ratan Tata, who according to a newspaper report warned that “Startups that burn investor money……..won’t get  a second chance.” (Emphasis added)

 

The 2008 Financial Crisis

 

The 2008 financial crisis  was also a case of unimaginable overconfidence of people who issued high-risk mortgages to borrowers with poor credit, often without proper assessment of their ability to repay. There was also some deregulation (including easier norms by the Credit Rating Agencies) making it easier to borrow. This led to a bubble in the U.S. housing market and, as a result, mortgage-backed securities lost value and many institutions like Lehman Brothers collapsed. These decisions of overconfident people led to a worldwide recession, job losses and  decrease in international trade.

 

Overconfident CEOs

 

·      Jurgen Schrempp: The CEO of Mercedes Benz and another legendary leader, after scaling the top in the German market, dreamt of becoming a global auto giant. To that end, he engineered a merger with Chrysler in the U.S. but the collaboration failed due to cultural differences, a crucial point that was perhaps overlooked due to overconfidence in pulling off a miracle.

·  Lee Iacocca: Some legendary business leaders too showed disproportionate exuberance and faced crises and failures in their otherwise illustrious careers. Lee Iacocca was a business leader with a magic touch and proverbial skills that helped Ford Motor Company to gallop at unimagined speeds. He, according to reports circulating at that time, was trying to dethrone Henry Ford. A shining example of overconfidence!

 

Stormy Catapult-like Business Revolution

 

The current AI business revolution is unprecedented in economic history. According to economists, the period between Industrial Revolutions has generally shortened, from centuries for the first two Revolutions to decades for the later ones, with the Fourth and Fifth Industrial Revolutions overlapping and advancing quickly. If the previous ones disrupted and caused hardships, this one will catapult and either spread delight or miseries of a very high order.

If the prevalent business thinking is creating an analysis-paralysis syndrome in many, the  speed and dimensions of the AI one are overwhelmingly higher and mindboggling.

“The euphoria created by the phenomenal initial successes of AI/AGI/ASI has created the biggest ever investment boom. According to press reports, it is estimated that by the end of 2028 the sums spent worldwide on data centres will exceed $3 trillion. In their overrunning optimism, a few firms are raising billions of dollars every few months. Many pragmatic experts are highlighting scenarios of “what will happen if the projected miraculous models develop hitches and God forbid if there are setbacks or failures”. [Source: The Economist - emphasis added.]

 

 

How to Avoid Overconfidence in times of Mindboggling Change

• First things first: Remember the lesson from “Only The Paranoid Survive”. 

• Remember the Sun Tsu dictum: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

• The feeling of overconfidence and resulting sense of infallibility often arise from initial successes. A study has mentioned that in informal military parlance, it is called ‘victory disease’. Each campaign and task must be planned, executed and evaluated to draw lessons.

• The planning stage is of utmost importance to avoid reverses due to overconfidence. In planning a war strategy, militaries play war games, some between their own platoons and also against a ‘synthetic enemy’.

• There is also a technique called  ‘pre-mortem’ analysis. Participants are told that the strategy has failed and asked to come up with reasons for the failure? Since it is an open invitation, most present reasons which otherwise they would not have dared to talk about. It is reported that many in the U.S. forces had doubts about the ‘Bay of Pigs” Cuban campaign but none spoke up beforehand. The whispers began after the fiasco. 

It is worth repeating the quote from The Economist again: “many pragmatic experts are painting scenarios of what will happen if the projected miraculous models develop hitches and God forbid if there are setbacks or failures”.  

 

Pray to God, but obey the sermons. Various religions emphasize the virtue of patience. In Christianity, the Bible encourages patience in affliction and service to others, while in Islam, the Quran states that God is with those who are patient, highlighting Sabr (patience) as a way to keep faith. In Hinduism, as per the Bhagvad Gita, patience leads to inner peace and spiritual growth by accepting life's ups and downs without attachment. [Source: Google Overview]

 

Remember: Prudence is foresight, far-sightedness, and the ability to make decisions based on their longer-range effects, and is a guide and mistress of human life. – Baltasar Gracian

 

Wizards Of World!

Spread the Creed of Wisdom & Prudence

Be authentic and true to your real self, listen to your inner voice

and joy will well up!

 

*Source: Unknown