Confidence or Overconfidence? Choose Wisely

Dear loving people,

I have always considered confidence to mean knowing what you're good at, the value you provide, and acting in a way that conveys that to others. Contrast this with arrogance which typically involves believing you are better in a particular area than you are, and you get a perfect description of overconfidence. 

Overconfidence is simply a biased way of looking at a situation. When you are overconfident, you misjudge your value, opinion, beliefs or abilities and you have more confidence than you should given the objective parameters of the situation. When you become overconfident, you are sure to experience problems because you may not prepare properly for a situation or may get into a dangerous situation that you are not equipped to handle. 

A glaring example of overconfidence is exhibited by a person who thinks his sense of direction is much better than it actually is. The person could show this for example by going on a long trip without a map and refusing to ask for directions if he gets lost along the way because he often thinks that others are not important or are not needed.

…and so a lonely tree was growing among the hot sands of a dead desert in the northern part of Cameroon. Prickly sands covered the Wood. The Sun mercilessly burned its bark. But the Tree kept on living in spite of all. Once, an overconfident Hawk flied over the desert. The Hawk saw the Wood and landed on its branch. He looked around the desert and said: “You are strange Tree, why do you keep on living among these dead hot sands? Who needs it?”

“You” the Tree answered. “Me?” the arrogant Hawk was surprised. “I don‘t need you.” “But if not me,” the Tree said, “you would have to sit on the hot sand instead of my branches. If not me, someone, seeing you sitting on the tree alone, would say that nobody needs you, too. And would ask you what you do live for. Sitting on my branches you, Hawk, think that I need you?” The Hawk thought about it and had to agree with the Tree. If there was no Tree, the hawk would feel himself alone and useless among this vast desert.

"No problem in judgment and decision making is more prevalent and more potentially catastrophic than overconfidence" Says Plous (1993) and he continues to say that "People are overconfident. Psychologists have determined that overconfidence causes people to overestimate their knowledge, underestimate risks, and exaggerate their ability to control events. Does overconfidence occur in investment decision making? Security selection is a difficult task. It is precisely this type of task at which people exhibit the greatest overconfidence."