Strategic Growth Eliminates Overconfidence

A lack of strategic growth and self-awareness can manifest as overconfidence in one's abilities and decision-making. A leader who is overly confident may underestimate risks, ignore warning signs, and fail to seek input from others, potentially leading to poor decision-making.

How does strategically growing your leadership help you avoid this pitfall of overconfidence? It helps you see risks in a healthy way, be more aware of warning signs, seek input from others, and make sound decisions.

In a recent interview, Malcolm Gladwell stated that overconfidence is more dangerous than incompetence. He explained that incompetent people usually do not rise to a level of leadership where they could negatively impact many others, whereas overconfident leaders often reach higher levels of leadership, creating more dangerous outcomes for larger numbers of people.  

He added that overconfident leaders have an estimation of their abilities that is greater than their actual abilities.  This is a serious problem and that leads to mistakes every bit as consequential if not more so, than the mistakes of incompetence.  

You may have heard of Ray Dalio.  He is an American billionaire investor and founder of Bridgewater Associates, currently worth over 15 billion dollars. In an interview a few years ago, he described how he nearly wiped out his fortune and company due to his own overconfidence, which led to numerous leadership mistakes. 

In his book, “Principles: Life and Work”, he wrote: In 1982, I was convinced the global economy was going to go into a depression. I was dead wrong…The stock market began a big bull run, and over the next eighteen years the U.S. economy enjoyed the greatest noninflationary growth period in its history,”  

He was overconfident in his decision, and what amplified this was his unwillingness to listen to and gain feedback from others.  Even from those affected by his overconfident decisions.  He traded his stocks according to his overconfidence and lost it all and then some.

Dalio lost so much money due to what he called being “so stupidly arrogant” that he had to let go of his employees and borrow $4,000 dollars from his Dad just to get by. 

He describes this experience as taking repeated blows to the head from a baseball bat.  That’s rough!  However, Ray Dalio is not overconfident today and has grown immensely from that experience.  He eventually made a comeback and attributes the success of Bridgewater Associates to the lessons he learned, the better person and leader he became by failing forward, and a process within Bridgewater Associates he calls idea meritocracy, a decision-making system where the best ideas win out. 

We can all learn from Ray Dalio’s experience and allow humility and meritocracy to win rather than letting overconfidence destroy. Where can you apply this in your leadership?

By Cindy Dove