The Fight Against Overconfidence

A few weeks ago, I wrote about the 100-hour rule:

For most disciplines, it only takes one hundred hours of active learning to become much more competent than an absolute beginner.

The downside of achieving basic competence is that it often leads to overconfidence. This is called the Dunning-Kruger effect. In a study published in 1999, David Dunning and Justin Kruger found that unskilled individuals greatly overestimated their abilities, while highly skilled individuals underestimated their abilities. Here's an illustrative figure from the study:

Dunning-Kruger Effect

The figure above shows that regardless of actual skill level, most people consistently perceived themselves as slightly above average. This is a gross underestimate for an expert, and a gross overestimate for a newbie.

The Danger of Overconfidence

Founders and VCs are often on the overestimation side of the curve. This is especially true when entering new industries or assuming new job roles. For example, a technical founder who does a few dozen sales calls might start feeling like they're good at sales. Similarly, a VC who understands a specific business model in the context of a single industry may start believing that they understand that model in other industries.

This kind of overconfidence can be very dangerous. Some examples that I've seen firsthand:

All of these are mistakes that come from overestimating what one knows and underestimating what one doesn't know.

The Danger of Being Unreceptive

The downside of overconfidence is frequently compounded with being unreceptive to advice and feedback from others. This is basically generalized overconfidence: instead of believing you are right about everything in some field, you believe you are right about everything. This is a common trait among founders who think they're the Steve Jobs of their industry: they think they have the right plan to build what the market needs, and they refuse to change that plan based on feedback. This is usually fatal to a company. If you have to choose, it's much better to be overconfident but receptive than appropriately confident but narrow-minded.

Being receptive to advice is critical for founders because they have to get so many things right when building a company. Who should be on the founding team? Which tech stack should be used? What features should the MVP include? What's the right go-to-market strategy? How should sales and marketing be handled? Eventually, all of these questions have to be answered well. Starting with good answers to 40% of the questions and iterating toward 100% based on feedback is much more likely to lead to success than starting at 80% and being stuck there due to closed-mindedness.

A Healthy Amount of Confidence

What can one do to overcome the dangers of overconfidence and unreceptiveness? Here are four concrete ideas:

Above all, be humble. The most successful people are rarely the ones who believe they know everything.

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