"Self-confidence is the answer to all questions: how to become a smart decision-maker", by Don Moore, translated by Zhang Yan, CITIC Publishing Group, September 2021 edition.
The following is excerpted from "Confidence is the Answer to All Questions", the subtitle is added by the editor, not the original text. It has been authorized by the publishing house to publish.
Too much confidence is one of the most influential and common factors in human judgment
Being too confident is one of the most central reasons why people make irrational decisions. Psychology professor Scott Prouss once wrote: "In the process of judgment and decision-making, there is no problem that is more common and more likely to have disastrous consequences than being too confident." Daniel Kahneman, winner of the 2002 Nobel Prize in Economics, whose main research direction is cognitive bias, once said that being too confident is "the most serious of all cognitive biases." Researchers on related issues have reached a consensus on the above views, which also shows the importance and universality of the problem of being too confident in the field of human judgment. It is no exaggeration to say that being too confident is the mother of all psychological biases. This sentence can be interpreted from two aspects.
First, too much confidence is one of the factors that affects human judgment the most and is the most common. Behavioral financiers Werner De Bonter and Richard Seyler write, "Perhaps the greatest finding in the field of psychology research on judgment is that people are often too confident. Too confident is considered to be the culprit in the sinking of the Titanic, the Chernobyl accident, the crash of the Challenger and Columbia space shuttles, the 2008 financial crisis and the ensuing Great Recession, and the oil spill at the Gulf Deepwater Horizon rig. Too much confidence can lead to highly leveraged trading in the stock market, high entrepreneurial failure rates, legal disputes, political factional struggles, and even wars.
Too confident also earns the title of "the mother of all psychological biases" because it reinforces the influence of other decision-making biases. It can also be said that it is a fundamental deviation. Other decision-making biases arise because we take many simplistic heuristic approaches to decision-making when understanding and dealing with the complex worlds of material, academic, social, and information. These biases are explained in detail in a number of psychology books that address decision-making issues, including Daniel Kahneman's Thinking, Fast and Slow, Dan Airry's Grotesque Behavior, and Harvard Business School's Psychology of Judgment and Decision-Making, co-authored with Max Bazeman.
If you're humble enough about your judgment, you're more likely to steer clear of mistakes that other people are prone to make. Judging by intuition can easily form biases and fallacies. The problem with intuition is that it's an unconscious process, and you can't monitor it. It is fully formed by the time it enters consciousness, and it "feels good about itself." Some intuitive judgments feel like things and will seem more attractive, while a rational view of risk will only make you feel bad. Having confidence in your intuition means that you will often rely on your intuition to make judgments, forgetting that relying on intuition to make judgments is not perfect.
I asked my students to use a percentage scale to rate themselves and their classmates. The worst student in the class deserves a 0; the best student in the class deserves a 100; and the student in the middle should get a 50, which means that half of the classmates are better than him and the other half are inferior to him. If all students knew where they were and scored according to the same measure, the average score of the class must be 50. Obviously not better than others but giving yourself a high score, this is a manifestation of your own positioning, is to believe that you are better than others of the exaggerated belief. When I asked students to rate their honesty, the average score was around 75.
I wouldn't accuse students of being dishonest for giving them such inflated scores of honesty, but I would say they are prone to judgmental biases. In order to understand their various views on this issue, I also wrote this passage in the questionnaire.
Psychologists have found that when self-evaluating socially accepted traits and performances, people often think they are above average when they are actually below average. This tendency is often referred to as the "self-interest attribution bias" in judgment. How well do you feel you are at avoiding this bias relative to your classmates? Give yourself a score for objectivity, and measure your performance relative to your classmates. A score of 100 indicates that you are less likely to produce self-interest attribution bias than your classmates, and a score of 0 indicates that you are more likely to have self-interest attribution bias than your classmates.
Students self-rate this, and the average score usually exceeds 50 points.
As an individual, when a decision is biased by bias, you may pay a great price for that decision. When we collectively deviate from judgment, the consequences can be very serious. Many people have noticed that in the course of the 2008 financial crisis, mass self-confidence was hard to blame. The financial crisis of 2008 and the great recession that followed were caused by a series of extremely unique circumstances, many of which were inextricably linked to too much confidence. The first is investors, banks and sovereign wealth funds that buy heavily in mortgage-backed bonds. They are willing to buy these bonds because they believe they understand the value of these bonds. Looking back, they were indeed overconfident. If they weren't too confident in the accuracy of their judgments, these investors wouldn't be so interested in buying subprime mortgage products.
Stills from the movie The Galloping Age (2003).
At the time, the investment market was in high demand for mortgage-backed bonds, and the normal mortgage products signed by solvent lenders simply were not enough to sell. The business of enthusiastic brokers determined to give investors what they want, duly called the mortgage market's "innovative" product, came into being — "no income, no asset loans," for those who have no income, no jobs, and no assets. This was followed by "loans of lies," in which brokers advised borrowers to fraudulently obtain loans by falsely claiming that they had jobs, incomes, or assets and the ability to repay them. Mortgage intermediaries advertised that their loan approval process was very simple, eliminating the cumbersome process of verifying lenders' income. Are you a small actor with an unstable job and an unstable annual income? No problem, we have a mortgage product tailored to you.
How can an actor who often fails to pick up a job pay off a $1 million mortgage? Many of these loans are paid off in the form of period-end lump sums: the repayment amount is low at first, but increases significantly over time. Repaying the loan is not a problem if the following conditions are met at the same time: (1) your income will increase significantly in the future; (2) house prices continue to grow, and you can apply for another "lie loan" after one or two years to pay off this loan. But by 2007, we found that lenders misestimated at least one of those conditions. This year, the number of lenders who could not afford even the first repayment of a new successful mortgage continued to increase. That's when investors begin to suspect that the risk assessment model they use to estimate default rates may not accurately predict default risk in the presence of a large number of "no-income, no-asset loans."
Investors around the world buy mortgage-backed bonds thinking they understand the risk of lender default. Default is the biggest risk in any loan or bond business. As a result, credit card interest paid to people with credit problems is much higher than on U.S. Treasuries. For the credit card business to make money, banks must charge enough interest to those who can repay and can afford to pay the interest to fill the deficit caused by defaulters.
If it weren't for the existence of too confident mortgage-backed bond investors, there might not have been "no income, no asset loans", "no income, no jobs, no asset loans", and "lie loans", and there would be no end-of-period lump sum payment plans. Not so many people will give up their jobs as bartenders, construction workers, dancers and go into the mortgage brokering industry. The continuous rise in housing prices has attracted some otherwise rational people to the army of speculators. The so-called speculation is to buy a house, paint it with a layer of paint, lay a layer of turf, and sell it quickly after the escrow period ends. Flyers, TV showgers and others who wish to make quick money by selling property, flipping houses or issuing mortgages also find opportunities to promote and provide services. If such a global mortgage-backed bond market had not existed, there might not have been a global housing bubble.
What exactly is generating the demand for mortgage-backed bonds? It boils down to too much trust in inaccurate risk assessment models. Judging by the performance of banks, they seem to believe that the proportion of mortgages in their business systems that risk default does not exceed 5%. That percentage is broadly consistent with what has been outlined based on mortgage and borrower defaults over the past few decades. To be fair, I think it's extremely important to make such predictions based on reliable data. By placing high bets (trillions of dollars in total) on banks, investors are betting that the banks' risk assessment models are accurate. But banks overestimate the accuracy of these risk assessment models because they overlook an important fact: The historical data they rely on so much does not include "no income, no jobs, no asset loans" and similar subprime mortgage operations. The default rate of those so-called low-risk mortgage portfolio loan products exceeded 50%, which is not difficult to understand why the investment returns of these bonds are much lower than expected.
The nature of the loans changed, but no one updated the risk assessment model until the situation was irretrievable. Why not ring the alarm earlier? There are definitely front-line workers who know that many of the "lie loans" they have sold are unable to repay. But as long as the investment institution is still buying mortgage-backed bonds, the intermediary has a commission to take. Most intermediaries know very well that "the music will stop sooner or later", and they also know that not everyone can grab the chair, and those who can't grab the chair will fall into the whirlpool. "But as long as the music is playing, you can only get up and continue dancing." Citigroup CEO Chuck Prince said in July 2007. A lot of people continue to invest because they believe they're smarter than the idiot who ended up being the "receiver." "I'll leave the scene in time, and you'll leave the market in time." They always say this to each other. Maybe someone did leave the scene in time, but for the rest, being too confident made them overestimate their place in the crowd: they thought they were smarter than others, but that wasn't the case.
Lack of self-confidence is often a mirror reflection of being too confident
Given the risks of being too confident, you might think it would be wise to lower your self-confidence level. However, how much is appropriate to lower it? Lack of self-confidence can lead you into self-doubt, inaction, and will make you miss out on an extraordinary life (inspirational books will tell you so). You refuse to take the initiative to talk to people, dare not go rock climbing, or give up starting a business. A lot of times you're stuck with your lack of confidence, especially when you can take some risks and get a good return. Inaction is the equivalent of making a mistake.
Unconfidence is also common, and many times, it is a mirror reflection of being too confident. Among my students, students who claim to be more honest than their classmates and are less prone to self-interest attribution bias often give themselves a below-average score on some issues. Overall, students generally consider themselves to be less capable of playing high-altitude acrobatics than other students. They underestimated their latin proficiency, their ability to ride a wheelbarrow, the number of companies they would start in the future, and the number of lives they could save in the future.
Psychologist Justin Krueger has found that in the face of difficult tasks that few people can successfully complete, people often feel inferior to others when measuring their performance. His paper during Cornell described how easy it is for people to underestimate themselves. Just give a difficult task, one that most people don't do well, or that's hard to meet, and people will tell you that the quality of the task you've done will be lower than average. Most of my students don't do the acrobatics of throwing highs very well. They'll think, "I know I can't do a good job of throwing, but maybe someone else here can do it well." In that case, I am certainly inferior to them. ”
Stills from the movie "Mr. Good" (2008).
This way of reasoning often arises when people are most likely to underestimate themselves: people know they can't do it, but they don't know what other people are capable of. Krueger and his colleague Ken Sawitzki note that people show this lack of confidence not only when evaluating their performance in accomplishing difficult tasks, but also when measuring what they don't do often. People think they use shoehorns and waffle molds less often than others. If a person rarely uses a shoehorn, he will reason like this: I am likely to use less than the average person. In fact, no one will often use shoehorns, but people will mistakenly conclude that they use shoehorns less often than others.
People with enough ability will worry that they are not good enough because of the negative tendency of self-ability, and worry that they are not worthy of the name. Thomas Jefferson, one of the founding fathers of the United States, the drafter of the U.S. Constitution, the first secretary of state in U.S. history, the U.S. ambassador to France, and the third President of the United States, was well-versed in Chinese and knowledgeable, but he insisted: "People trust me beyond my ability." John Steinbeck, a double Nobel and Pulitzer Prize-winning writer, insisted, "I'm not a writer." I was just deceiving myself and everyone else. ”
Maya Angelo, who has won the National Medal of Honor, the Presidential Medal of Freedom, the Grammy Award and the Tony Award, and honorary degrees from 22 prestigious universities, admits: "I've written 11 books, but every time I think, 'Oh, this time they're going to find out, I'm just fooling people, this time they're going to expose my tricks.'" Actress Judy Foster was deeply disturbed by her Oscar and her college acceptance: "I think it must be a big oolong, just like I feel when I walk on the Yale campus." 」 I think you'll soon find out you're wrong and take the Oscar back. ”
The term "self-denial tendency" first appeared in a 1978 paper that examined the effects of self-denial tendencies on high-achieving women. Katie Ken and Claire Spunman revisited the topic in their book The Confidence Code, lamenting women's lack of confidence and encouraging women to be more confident. The book contains interviews with many outstanding women, including former IMF President Christina Lagarde, U.S. Senator Kirsten Gillibrand, and American basketball star Monique Currie. When asked if they had experienced self-doubt, these highly capable and successful women admitted that they had had such experiences. So have the men who are their competitors ever experienced self-doubt? "As for men," Currie replied, "I feel like he's been sitting on the cold bench and not playing, he's as confident as the superstars on the team." ”
We don't see the inner self-doubt of other people, so it's easy to assume that other people won't be bothered by self-doubt. In Ken and Sputmann's work, no men have been interviewed about whether they doubt himself, and the worst bench player may have just pretended to be confident to hide his doubts about himself. Based on my years of research experience, no significant gender differences have been found in the expression of self-confidence, non-verbal self-confidence, and the interpretation of other people's confidence. I've found a lot of evidence that both men and women worry about not being reliable, have self-doubt, and sometimes be very convinced that they're inferior to others, even if they don't. The study also found that the people with the worst tendencies to deny self-ability are often not those with the worst abilities. Impostors, pretentious people and scammers and other people who have no real ability, but they think very highly of themselves and look at everything. In many institutions, the hardest working and most conscientious people are most worried about failing the expectations of others because of their own incompetence.
Another area where most people are not confident is writing
When you can't see the shortcomings of others and doubt yourself, you are most likely to feel that you are abusive. For example, you know your body best. Therefore, it is easy to think that your body has more spots, stretch marks, or hairs that are not in place than others. The naked truth is that everyone's body is imperfect, it's just that you are more familiar with your own body. To make matters worse, most of the photos we see have protagonists with young, beautiful, and healthy bodies, and they dispose of all imperfections with retouching software.
Stills from the movie Pride and Prejudice (2005).
Interestingly, the mental mechanisms that cause us to underestimate ourselves can also lead us to overestimate ourselves. My students think they are more honest than their classmates because they know themselves better. They know they're honest, but they can't confirm if the other person is honest. Because to evaluate a person's honesty or not, we must examine whether he is telling the truth. We can only speculate about what other people really think. One student can reason like this: "If I knew I was honest in the vast majority of situations, it was more likely that other people wouldn't be honest with me, so I might be more honest than average." "In this way, they exaggerate how honest they are compared to others, and overestimate their relative honesty." Knowing that you insist on brushing your teeth every day can also lead a person to mistakenly think they brush their teeth more often than others.
Of course, rather than knowing your own body and oral hygiene habits, sometimes it can lead to more serious consequences of not being sure about your relative strengths and weaknesses. For example, the problem of children from low-income families entering institutions of higher learning. In the United States, only 1/3 of the top 1/4 of high school graduates with household income can enter top colleges and universities in the United States, while 78% of high school graduates in the top 1/4 of family income can enter top colleges and universities. The most important reason for this discrepancy is that many children from low-income families do not apply at all. On the one hand, they don't know what opportunities they can take and what kind of financial assistance they can get. On the other hand, they don't think they have much chance of being admitted.
The reason they are so pessimistic is because they don't understand what level those who can get into the top universities in the United States are, they just speculate that they are unlikely to be admitted. In fact, top colleges and universities are in great need of good kids from low-income families. Most colleges and universities are keen to enroll students from different racial, gender, cultural, geographical and social backgrounds in order to increase the diversity of the student body. Most private universities, which are very selective about their student origins, will try to help low-income families bear high tuition fees. That said, they offer generous financial aid packages to families who can't afford to pay their tuition. Obviously, boosting self-confidence is very beneficial for students who are obviously excellent but are afraid to apply to top universities.
Another area where most people are not confident is writing. Writing is hellishly difficult, and even successful writers often feel inadequate. Hugh Howie once complained in his blog: "I'm really not good at writing. As a best-selling author who has published 11 books, Howie wrote: "I can assure you that my writing level is actually below average. Watching a poor draft being born in my pen makes me sick. It's an orderless, drunken mess. "Writers are very aware of the difficulties they encounter, but rarely have the opportunity to understand the challenges others face when writing. You always see finished pieces, beautifully framed and neatly arranged in the bookstore. It looks so beautiful and orderly, as if declaring the author's remarkable ability.
Stills from the movie Rock School (2003).
The excellent writer David Rykov knows better. When the day-care children next door were brought in, he sat down at his computer and started writing. Although the previous work had not progressed satisfactorily, the arrival of a new day gave him hope.
Maybe today will be fine, not as inefficient as yesterday, wasting all time on the phone, email, and snacks. Yes, the key is today. But let's do Scrabble first. Wait, what did Paul Krugman say today? Oh! Gayle Collins! I like her so much! Look at the email, you haven't checked a new email in the past 40 minutes. Now, grab a snack. My good friend Patti called... What, it's already noon? The babies in the day-care class next door are now noisy again because Mom and Dad have come to pick them up and take them home. Now, look at the old gods, sit down and write a sentence! Just write a word, it won't kill you. It's so damning!
Even if writing doesn't almost cost you your life, writing is hard for everyone. You should probably be more confident in your writing level and less confident in your level of honesty. To maintain moderate self-confidence, it must match basic facts, evidence, and abilities. In other words, if you want to really find your own position, you must abandon assumptions, imaginations and illusions in judgment. But as William James reminds us, the illusion is simply too tempting.
Author 丨 [Beauty] Don Moore
Excerpt 丨An also
Editor 丨Li Yang
Introduction Proofreading 丨 Lucy