Is Overconfidence Good or Bad?

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If someone tells you you’re overconfident, it’s usually not a compliment. An overconfident person is perceived as being overbearing, brash, cocky, pushy — you get the idea. However, the other side of the overconfidence coin is that it takes guts and a lot of risk tolerance to be an entrepreneur.

Definition of Overconfidence

Overconfidence is having too much confidence. You may ask, "Too much for what?" Too much for your own good seems to be the consensus.

Overconfident people are said to think of themselves as superior to others. Often-cited examples of fallout from overconfidence include Enron, Lehman Brothers and the Titanic. Overconfident people tend to think that they’re smarter than they really are, that they know more than they actually do and that they’re always right. All of this can blind them to the amount of risk they’re taking.

Entrepreneurial types are almost always confident risk takers, or you wouldn’t have opened your own business in the first place. So, is there a middle ground? If there is, how do you get there?

How Do Others See You?

The thing about confidence in general is that a big part of it is how others perceive you. If you stand erect, speak up clearly, have a firm handshake and maintain eye contact with people, you’re seen as a confident person.

If standing erect morphs into strutting and speaking up becomes shouting, then you may be overconfident. Overconfidence is not pretty. Most people are put off by it and avoid it. The people who have to put up with you, like employees, will revel in your mistakes.

In addition to not winning friends or influencing people, overconfidence can be seen as a weakness, as in: For what are you compensating? Overcompensation tends to breed mistrust, and people who are more realistic can see right through it.

Overconfidence in Black and White

One common example of overconfidence is how we often underestimate the time a task or project will take. We’ve all been there, answering “Sure thing!” with a nod and a grin when a customer asks if we can get something done by tomorrow.

The gap between self-confidence and ability can be one of the toughest gaps to close. Try making a scorecard. You can use an Excel spreadsheet to record when work was promised and when it was delivered. Sometimes, seeing it in black and white is the reality check you need.

Overconfident decision making can have its own tab in your spreadsheet. Column headings are as follows:

  • A brief description of the issue
  • A brief description of what you decided
  • A percentage score of how confident you were that your decision was the right one
  • A brief description of the result of your decision

The act of recording and revisiting your promises and your decisions is not meant to be punitive. It’s meant to help you figure out the fine line between confidence and overconfidence.

Overconfident You vs. Confident You

A downside to overconfidence is that it can actually cause you to make more mistakes than you would if your ego was more balanced. Thinking that you’re infallible can lead to poor decisions that cost big bucks. Enter the two-column list.

When you have to make a big decision about your business, use a two-column list to make an argument for and against the decision you’re about to make. If you come up with a tie, your overconfidence will come in handy. Use it to take the leap one way or the other.

If you happen to make the wrong decision, own it. The only thing worse than an overconfident person is an overconfident person who never admits when he's wrong.

The Answer to the Question

So, the answer to whether overconfidence is good or bad is simple: yes. It can dupe you into thinking you have control over everything, it can cause you to make costly mistakes and it can make people not like you. However, it can also help you when a major decision has to be made, and the pros and cons weigh the same. You wouldn’t have gotten to where you are without making fly-by-the-seat-of-your-pants decisions and putting it all on the line.

Strive for a balance and be aware of how you are perceived. Ask a trusted friend or mentor for her assessment of how people perceive you. Listen and learn.

References

About the Author

LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business. In addition to writing for PocketSense, she writes for Bizfluent, Budgeting the Nest, Legal Beagle, PocketSense and Zacks.