Malcolm Gladwell has written another though provoking piece for the New Yorker. The article is available for a limited time outside of the New Yorker’s pay wall and you can find it here. Although the article was inspired by the fall of Bear Stearns, it’s relevant to all aspects of business which involve a high number of variables and possible outcomes. Worthwhile reading for entrepreneurs and VCs alike. My favorite excerpts follow below:
As novices, we don’t trust our judgment. Then we have some success, and begin to feel a little surer of ourselves. Finally, we get to the top of our game and succumb to the trap of thinking that there’s nothing we can’t master. As we get older and more experienced, we overestimate the accuracy of our judgments, especially when the task before us is difficult and when we’re involved with something of great personal importance
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Perhaps this is part of why we play games: there is something intoxicating about pure expertise, and the real mastery we can attain around a card table or behind the wheel of a racecar emboldens us when we move into the more complex realms. “I’m good at that. I must be good at this, too,” we tell ourselves, forgetting that in wars and on Wall Street [or any business] there is no such thing as absolute expertise, that every step taken toward mastery brings with it an increased risk of mastery’s curse.
Filed under: business, economics, start-ups, vc, venture capital | 4 Comments
Tags: firstround, kentgoldman
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It is very common for us to expect yesterday experiences to be repeated tomorrow. This is at heart of business of sales and weather forecasting. We also have a need to create cause-and-effect relationship to “learn”, i.e. to create an illusion of mastery and self importance. That is what our society pay for when they buy experience. The alternative would be to value an ability/talent over the experience, but a talent is considered to be even more illusive than experience and very hard to measure.
So from the individual perspective the alternatives are to cloak yourself into a robe of expertise, experience and self-importance which may result in steady, stable, financially and emotionally rewarding rewarding career, or to seek the discomfort of the new learning and to recognize the role of randomness in your previous successes. Just try to focus and not to create “too many moving parts” around your endeavors.
overconfidence is an enemy of successful person
Did you read the article by Gladwell in the NY’er on Vivek Ranadive “How David beats Goiliath” May 11, 2009 and his approach to basketball? The basketball part was a metaphor for outsiders bringing a new approach to an established game/enterprise without the burden of prior knowledge. These “newbies” aren’t afraid to ask “why not” and have yet to be burned by their risk taking. What I have found through experience is that over time the system starts to drag you in, and in the case of basketball, you find your teams playing like everyone else after just a few seasons. Why? You have some success playing unconventionally, but to reach championship level you tweek, adjust, change . Because there is no “perfect” way to play you find your program dragged back to the pack. I might think this happens in business as wel. Yes?
I, too heard MG speak on the psychology of overconfidence and, while I think his books are masterfully supported and I subscribe to his philosophies and tenets on a daily basis, I find his view of ‘overconfidence’ somewhat flawed.
I think it would be difficult for MG to argue against the idea that what he calls overconfidence is actually just sheer hubris and arrogance. These are qualities hardly worth analysis, so MG calls it overconfidence and it becomes a relevant topic.
If you look at the examples he cites – most notably the guys on Wall Street and General Hooker in the Battle of Chancelorsville – these are clearly examples of hubris getting the better of an individual.
The difference is really a matter of timing. What would be called confidence is only dubbed ‘overconfidence’ when it yields a negative result. For instance, everyone know Mohammed Ali for his confidence before his fight with Frasier. Had Ali lost, we would be talking about his overconfidence… Overconfidence can only be identified in the light of the result. Patton, Montgomery, Ali and Ruth all displayed the sort of confidence that we hope our children will aspire to. Had they lost, they’d be the subject of MG lectures.
Also, in his lecture, MG touches on the inability or unwillingness to listen to those around you as one of the hallmarks of overconfidence as he sees it. Again, this is arrogance, not overconfidence. I’m quite sure that more than one person told Edison that the quest for artificial light was something better left behind. Also, there were enough people telling Chamberlain to negotiate with Hitler that he took their advice.
Bottom line is that while Malcolm Gladwell has given us some really great social analysis in his books, his current lecture is revealed as deeply flawed with a short objective glance. If I subscribed to the tenets of his argument, i might suggest that MG has become so successful at the contextual analysis of social phenomenon that he’s come to believe that any passing connections he makes between cause and effect are, in fact, brilliant by simple virtue of him having thought of them. Overconfidence? I’ll let you decide.