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This might not surprise you, but below is a picture of a paperclip. It is red.

This red paperclip is currently sitting on my desk next to my computer. I want to trade this paperclip with you for something bigger or better, maybe a pen, a spoon, or perhaps a boot.

If you promise to make the trade I will come and visit you, wherever you are, to trade.

Hope to trade with you soon!

Kyle

PS
I'm going to make a continuous chain of 'up trades' until I get a house. Or an Island. Or a house on an island. You get the idea.

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This might not surprise you, but below is a picture of a paperclip. It is red. This red paperclip is currently sitting on my desk next to my computer. I want to trade this paperclip with you for something bigger or better, maybe a pen, a spoon, or perhaps a boot.

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Overconfidence. The word itself is irritating. Knowing that it often works is infuriating.

We'd prefer to believe that, like pride, overconfidence will reliably trip and stumble its way to a predictable fall and clear the path for those with level-headed confidence, gilded with humility, to climb the ladder. But that isn't how it even usually goes.

Psychology research has often asked why that is, and churned up a few possible answers. A 2012 study concluded that even when overconfidence produces subpar results, its charm still wins the day. We might expect someone with more confidence than ability to underperform when pressed. The study tested that expectation and found it more or less accurate-but also found that it really doesn't matter. Overconfidence may not deliver when objectively tested, but it has a knack for seducing people to such a degree that they ignore the results in favor of keeping the golden child on a pedestal.

If you had to isolate why this happens, it appears to come down to a matter of status-a commodity that overconfidence is expert at creating and nurturing. When managed well, the social status conferred by overconfidence has an aura just shy of magical, capable of keeping our attention diverted from measurable results.

That's a jarringly paradoxical conclusion when you consider the average person's gut reaction to "that overconfident jerk." How can we be both repulsed and seduced by the same thing? The question gets stranger in light of another study showing how even rudeness gets a pass if a person's overconfidence has already alchemized sufficient status.

In one of the study's experiments, participants watched a video of a man at a sidewalk café put his feet on another chair, tap cigarette ashes on the ground and rudely order a meal. Participants rated the man as more likely to "get to make decisions" and able to "get people to listen to what he says" than participants who saw a different video of the same man behaving politely. Through a few other experiments in the study, the same results prevailed-people tended to rate the rule breakers as more in control and more powerful than people who toed the line.

And what's the essential ingredient in believing oneself to be above the rules? Overconfidence, of course. (This may also help explain why rude sales associates outsell others at luxury stores.)

Those studies circle the question of why we're prone to falling for the chutzpah of overconfidence, but say little about why the overconfident are so good at pulling it off. The most recent study on the subject has an answer that's not likely to lessen our irritation, but, irritatingly, it makes some sense, and can be summarized like this: Belief sells, whether it's true or not. In the case of overconfidence, the belief in one's ability-however out of proportion to reality-generates its own infectious energy. Self-deception is a potent means of convincing the world to see things your way.

Participants in the study (a group of college students) were asked to rate their own and their peers' abilities at the beginning of a 6-week course. About half were under-confident and a little less than half were overconfident (with the small balance of students accurately judging their abilities). They were then asked to reassess at the end of the course, after everyone had a chance to perform and real results were there for all to see.

The study showed that at the start of the course, overconfident students received higher peer ratings-and at the end of the course, regardless of how well or poorly they did, the overconfident students were still rated higher than others. In effect, the students' actual performance hardly mattered compared to the seductive signals sent by those believing they were the best.

This study added the wrinkle of gauging participants' level of self-deception about their abilities, and found a strong correlation between the social sway of overconfidence and depth of self-deception. As the researchers summed it up, "Our findings suggest that people may not always reward the more accomplished individual but rather the more self-deceived."

We may not like that conclusion, but it's difficult to argue that it isn't in evidence around us every day. People who don't believe in themselves-whether that belief is well-grounded or not-aren't likely to convince others to buy in. That's partly what the psychological dynamic of self-efficacy is about: If you expect others to think you're capable, you'd better believe it yourself. That's as true for healthy confidence as it is for its inflated alter-ego.

What the latest study and elements of the others are telling us is that self-deception is an especially potent brand of status fertilizer. When packaged with personality, it makes others want to believe even when the results would counsel otherwise. And though that doesn't make the topic any less infuriating, it does throw some light on what makes overconfidence effective, despite its reputation.

The latest study was published in the online journal .
You can find David DiSalvo on Twitter @neuronarrative and at his website The Daily Brain. His latest book is Brain Changer: How Harnessing Your Brain's Power To Adapt Can Change Your Life.

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The Surprising, Infuriating Power of Overconfidence

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Belief sells, whether it's true or not. In the case of overconfidence, the belief in one's ability-however out of proportion to reality-generates its own infectious energy. Self-deception is a potent means of convincing the world to see things your way.

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Daniel Kahneman uses his personal experiences to illustrate the point that many people do not change their perceptions even the face of overwhelming evidence that they are wrong.

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We were willing to make that admission because, as it turned out, despite our certainty about the potential of individual candidates, our forecasts were largely useless. The evidence was overwhelming. Every few months we had a feedback session in which we could compare our evaluations of future cadets with the judgments of their commanders at the officer-training school. The story was always the same: our ability to predict performance at the school was negligible. Our forecasts were better than blind guesses, but not by much.

We were downcast for a while after receiving the discouraging news. But this was the army. Useful or not, there was a routine to be followed, and there were orders to be obeyed. Another batch of candidates would arrive the next day. We took them to the obstacle field, we faced them with the wall, they lifted the log and within a few minutes we saw their true natures revealed, as clearly as ever. The dismal truth about the quality of our predictions had no effect whatsoever on how we evaluated new candidates and very little effect on the confidence we had in our judgments and predictions.

I thought that what was happening to us was remarkable. The statistical evidence of our failure should have shaken our confidence in our judgments of particular candidates, but it did not. It should also have caused us to moderate our predictions, but it did not. We knew as a general fact that our predictions were little better than random guesses, but we continued to feel and act as if each particular prediction was valid. I was reminded of visual illusions, which remain compelling even when you know that what you see is false. I was so struck by the analogy that I coined a term for our experience: the illusion of validity.

I had discovered my first cognitive fallacy.

Decades later, I can see many of the central themes of my thinking about judgment in that old experience. One of these themes is that people who face a difficult question often answer an easier one instead, without realizing it. We were required to predict a soldier's performance in officer training and in combat, but we did so by evaluating his behavior over one hour in an artificial situation. This was a perfect instance of a general rule that I call WYSIATI, "What you see is all there is." We had made up a story from the little we knew but had no way to allow for what we did not know about the individual's future, which was almost everything that would actually matter. When you know as little as we did, you should not make extreme predictions like "He will be a star." The stars we saw on the obstacle field were most likely accidental flickers, in which a coincidence of random events - like who was near the wall - largely determined who became a leader. Other events - some of them also random - would determine later success in training and combat.

You may be surprised by our failure: it is natural to expect the same leadership ability to manifest itself in various situations. But the exaggerated expectation of consistency is a common error. We are prone to think that the world is more regular and predictable than it really is, because our memory automatically and continuously maintains a story about what is going on, and because the rules of memory tend to make that story as coherent as possible and to suppress alternatives. Fast thinking is not prone to doubt.

The confidence we experience as we make a judgment is not a reasoned evaluation of the probability that it is right. Confidence is a feeling, one determined mostly by the coherence of the story and by the ease with which it comes to mind, even when the evidence for the story is sparse and unreliable. The bias toward coherence favors overconfidence. An individual who expresses high confidence probably has a good story, which may or may not be true.

I coined the term "illusion of validity" because the confidence we had in judgments about individual soldiers was not affected by a statistical fact we knew to be true - that our predictions were unrelated to the truth. This is not an isolated observation. When a compelling impression of a particular event clashes with general knowledge, the impression commonly prevails. And this goes for you, too. The confidence you will experience in your future judgments will not be diminished by what you just read, even if you believe every word.

I first visited a Wall Street firm in 1984. I was there with my longtime collaborator Amos Tversky, who died in 1996, and our friend Richard Thaler, now a guru of behavioral economics. Our host, a senior investment manager, had invited us to discuss the role of judgment biases in investing. I knew so little about finance at the time that I had no idea what to ask him, but I remember one exchange. "When you sell a stock," I asked him, "who buys it?" He answered with a wave in the vague direction of the window, indicating that he expected the buyer to be someone else very much like him. That was odd: because most buyers and sellers know that they have the same information as one another, what made one person buy and the other sell? Buyers think the price is too low and likely to rise; sellers think the price is high and likely to drop. The puzzle is why buyers and sellers alike think that the current price is wrong.

Most people in the investment business have read Burton Malkiel's wonderful book "A Random Walk Down Wall Street." Malkiel's central idea is that a stock's price incorporates all the available knowledge about the value of the company and the best predictions about the future of the stock. If some people believe that the price of a stock will be higher tomorrow, they will buy more of it today. This, in turn, will cause its price to rise. If all assets in a market are correctly priced, no one can expect either to gain or to lose by trading.

We now know, however, that the theory is not quite right. Many individual investors lose consistently by trading, an achievement that a dart-throwing chimp could not match. The first demonstration of this startling conclusion was put forward by Terry Odean, a former student of mine who is now a finance professor at the University of California, Berkeley.

Odean analyzed the trading records of 10,000 brokerage accounts of individual investors over a seven-year period, allowing him to identify all instances in which an investor sold one stock and soon afterward bought another stock. By these actions the investor revealed that he (most of the investors were men) had a definite idea about the future of two stocks: he expected the stock that he bought to do better than the one he sold.

To determine whether those appraisals were well founded, Odean compared the returns of the two stocks over the following year. The results were unequivocally bad. On average, the shares investors sold did better than those they bought, by a very substantial margin: 3.3 percentage points per year, in addition to the significant costs of executing the trades. Some individuals did much better, others did much worse, but the large majority of individual investors would have done better by taking a nap rather than by acting on their ideas. In a paper titled "Trading Is Hazardous to Your Wealth," Odean and his colleague Brad Barber showed that, on average, the most active traders had the poorest results, while those who traded the least earned the highest returns. In another paper, "Boys Will Be Boys," they reported that men act on their useless ideas significantly more often than women do, and that as a result women achieve better investment results than men.

Of course, there is always someone on the other side of a transaction; in general, it's a financial institution or professional investor, ready to take advantage of the mistakes that individual traders make. Further research by Barber and Odean has shed light on these mistakes. Individual investors like to lock in their gains; they sell "winners," stocks whose prices have gone up, and they hang on to their losers. Unfortunately for them, in the short run going forward recent winners tend to do better than recent losers, so individuals sell the wrong stocks. They also buy the wrong stocks. Individual investors predictably flock to stocks in companies that are in the news. Professional investors are more selective in responding to news. These findings provide some justification for the label of "smart money" that finance professionals apply to themselves.

Although professionals are able to extract a considerable amount of wealth from amateurs, few stock pickers, if any, have the skill needed to beat the market consistently, year after year. The diagnostic for the existence of any skill is the consistency of individual differences in achievement. The logic is simple: if individual differences in any one year are due entirely to luck, the ranking of investors and funds will vary erratically and the year-to-year correlation will be zero. Where there is skill, however, the rankings will be more stable. The persistence of individual differences is the measure by which we confirm the existence of skill among golfers, orthodontists or speedy toll collectors on the turnpike.

Mutual funds are run by highly experienced and hard-working professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker. At least two out of every three mutual funds underperform the overall market in any given year.

More important, the year-to-year correlation among the outcomes of mutual funds is very small, barely different from zero. The funds that were successful in any given year were mostly lucky; they had a good roll of the dice. There is general agreement among researchers that this is true for nearly all stock pickers, whether they know it or not - and most do not. The subjective experience of traders is that they are making sensible, educated guesses in a situation of great uncertainty. In highly efficient markets, however, educated guesses are not more accurate than blind guesses.

Some years after my introduction to the world of finance, I had an unusual opportunity to examine the illusion of skill up close. I was invited to speak to a group of investment advisers in a firm that provided financial advice and other services to very wealthy clients. I asked for some data to prepare my presentation and was granted a small treasure: a spreadsheet summarizing the investment outcomes of some 25 anonymous wealth advisers, for eight consecutive years. The advisers' scores for each year were the main determinant of their year-end bonuses. It was a simple matter to rank the advisers by their performance and to answer a question: Did the same advisers consistently achieve better returns for their clients year after year? Did some advisers consistently display more skill than others?

To find the answer, I computed the correlations between the rankings of advisers in different years, comparing Year 1 with Year 2, Year 1 with Year 3 and so on up through Year 7 with Year 8. That yielded 28 correlations, one for each pair of years. While I was prepared to find little year-to-year consistency, I was still surprised to find that the average of the 28 correlations was .01. In other words, zero. The stability that would indicate differences in skill was not to be found. The results resembled what you would expect from a dice-rolling contest, not a game of skill.

No one in the firm seemed to be aware of the nature of the game that its stock pickers were playing. The advisers themselves felt they were competent professionals performing a task that was difficult but not impossible, and their superiors agreed. On the evening before the seminar, Richard Thaler and I had dinner with some of the top executives of the firm, the people who decide on the size of bonuses. We asked them to guess the year-to-year correlation in the rankings of individual advisers. They thought they knew what was coming and smiled as they said, "not very high" or "performance certainly fluctuates." It quickly became clear, however, that no one expected the average correlation to be zero.

What we told the directors of the firm was that, at least when it came to building portfolios, the firm was rewarding luck as if it were skill. This should have been shocking news to them, but it was not. There was no sign that they disbelieved us. How could they? After all, we had analyzed their own results, and they were certainly sophisticated enough to appreciate their implications, which we politely refrained from spelling out. We all went on calmly with our dinner, and I am quite sure that both our findings and their implications were quickly swept under the rug and that life in the firm went on just as before. The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry. Facts that challenge such basic assumptions - and thereby threaten people's livelihood and self-esteem - are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.

The next morning, we reported the findings to the advisers, and their response was equally bland. Their personal experience of exercising careful professional judgment on complex problems was far more compelling to them than an obscure statistical result. When we were done, one executive I dined with the previous evening drove me to the airport. He told me, with a trace of defensiveness, "I have done very well for the firm, and no one can take that away from me." I smiled and said nothing. But I thought, privately: Well, I took it away from you this morning. If your success was due mostly to chance, how much credit are you entitled to take for it?

We often interact with professionals who exercise their judgment with evident confidence, sometimes priding themselves on the power of their intuition. In a world rife with illusions of validity and skill, can we trust them? How do we distinguish the justified confidence of experts from the sincere overconfidence of professionals who do not know they are out of their depth? We can believe an expert who admits uncertainty but cannot take expressions of high confidence at face value. As I first learned on the obstacle field, people come up with coherent stories and confident predictions even when they know little or nothing. Overconfidence arises because people are often blind to their own blindness.

True intuitive expertise is learned from prolonged experience with good feedback on mistakes. You are probably an expert in guessing your spouse's mood from one word on the telephone; chess players find a strong move in a single glance at a complex position; and true legends of instant diagnoses are common among physicians. To know whether you can trust a particular intuitive judgment, there are two questions you should ask: Is the environment in which the judgment is made sufficiently regular to enable predictions from the available evidence? The answer is yes for diagnosticians, no for stock pickers. Do the professionals have an adequate opportunity to learn the cues and the regularities? The answer here depends on the professionals' experience and on the quality and speed with which they discover their mistakes. Anesthesiologists have a better chance to develop intuitions than radiologists do. Many of the professionals we encounter easily pass both tests, and their off-the-cuff judgments deserve to be taken seriously. In general, however, you should not take assertive and confident people at their own evaluation unless you have independent reason to believe that they know what they are talking about. Unfortunately, this advice is difficult to follow: overconfident professionals sincerely believe they have expertise, act as experts and look like experts. You will have to struggle to remind yourself that they may be in the grip of an illusion.

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We were willing to make that admission because, as it turned out, despite our certainty about the potential of individual candidates, our forecasts were largely useless. The evidence was overwhelming. Every few months we had a feedback session in which we could compare our evaluations of future cadets with the judgments of their commanders at the officer-training school.

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"the line between justifiable and excessive self-confidence generally becomes evident only after the damage is done" (Tim Laseter)

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A version of this article appeared in the Spring 2017 issue of strategy+business.

It is rare for a week to pass without a newspaper or magazine offering a tale of the mistaken path of a fallen business executive, quoting critics who explain the errors that led to the failure. However, investors and boards of directors responsible for selecting a CEO don't have the luxury of hindsight. They should, ideally, identify any shortcomings in their prospective CEO before there is trouble, not after the fact. This is no easy task. Is there some predictable fatal flaw that distinguishes responsible risk taking from something reckless or even sinister?

One field of academic research suggests an answer: executive hubris. Hubris, defined as excessive self-confidence or pride, leads CEOs to make overly risky bets, or to ignore relevant warning signs and fail to invoke contingency plans. The problem, of course, is that the difference between justifiable and excessive self-confidence generally becomes evident only after the damage is done. And most incoming chief executives have pride and self-confidence well above normal levels, and with good reason. A typical CEO has an elite education and a decades-long track record of superior performance. More importantly, regardless of tenure or education, a CEO generally earns that title by gaining the confidence of the experienced leaders and savvy investors on the company's board.

The challenge for an investor, a board of directors, or an advisor to executives is to recognize when the CEO (and perhaps the whole management team) is about to cross a line - from making bold strategic bets with warranted assuredness, to risking the enterprise through reckless and dysfunctional overconfidence. Four early signals can help in navigating these muddy waters. The first two, narcissism and dismissiveness, are warning signs of hubris. The other two, humility and inquisitiveness, are promising signs of justifiable confidence.

The Narcissism Warning Sign

Signs of narcissism offer the most critical indicator of hubris ahead. In the classic Greek myth, Narcissus perished after becoming captivated by his own image reflected in water. Psychologists characterize a narcissist as someone with a grandiose view of his or her own talents and a craving for admiration. Narcissists exhibit these qualities to the point where they lose perspective and begin to make unreasonable, destructive decisions.

A narcissistic CEO becomes focused on his or her ego rather than the company's stakeholders. This trait is all too prevalent among executive leaders, as Arijit Chatterjee and Donald C. Hambrick of Penn State University showed in a wonderfully titled 2007 paper, " It's All about Me: Narcissistic Chief Executive Officers and Their Effects on Company Strategy and Performance." Their study of 111 CEOs in the computer industry found that those who demonstrated narcissistic traits tended to make more and larger acquisitions, which led to "extreme and fluctuating organizational performance." Other studies have tied acquisition premiums explicitly to media praise and relative pay for the CEO.

A prime case study of the destructive impact of a narcissistic CEO features Joseph Nacchio, former CEO of Qwest Communications. Nacchio launched his business career in the telecommunications industry through serendipity: At a career fair, he mistakenly ended up in an interview room for AT&T instead of Procter & Gamble. Starting as a young engineer in 1969, he advanced through the business ranks while also extending his educational credentials by earning a master's degree in business from NYU and a Sloan Fellowship from MIT. In 1993 he became the youngest executive leading a major AT&T business unit: the struggling consumer long-distance business. While the unit continued to struggle, Nacchio's intelligent but highly competitive manner made him stand out. He gained the respect of colleagues, but he could also instill fear. In a 2005 Denver Post article about Nacchio, former fellow AT&T executive Dick Martin would later recall, "He can be very cutting in a meeting where he's in charge. He doesn't suffer fools easily."

Indeed, one of the earliest signs of narcissism that Nacchio displayed was a propensity for building himself up at the expense of his colleagues, going beyond the competitiveness one might expect from someone who was openly angling for the chief executive role. As a 2000 Forbes profile put it, he was known for having "sniped at [AT&T's] top executives, impugned their intelligence and even questioned their psychological stability." The same article quoted Nacchio asserting that he could have been "a powerful asset" to them as CEO.

But when it became clear in the mid-1990s that Nacchio wouldn't be chosen as CEO, he began looking elsewhere. He landed the chief executive position at Qwest in 1997, on the strength of a plan to turn this relatively small, Denver-based telecom company (US$697 million in 1997 revenues, compared with AT&T's $53 billion) into an industry leader. Launched just a decade earlier, in 1988, Qwest had originally been an offshoot of the Southern Pacific railroad line, installing fiber-optic cable for companies such as MCI along its rights of way. Qwest had grown by laying its own cables alongside those of its customers. Now, in the early years of the Internet, Nacchio proposed that Qwest could step out in front on the basis of its technological prowess.

Upon accepting the CEO offer, Nacchio quickly developed a business plan - purportedly on the back of an envelope - for an IPO later that year. He was no longer held in check by a staid culture, as he had been at AT&T, and he articulated increasingly grandiose views when talking to journalists. In a 1998 Wired magazine article, " Building the Future-Proof Telco," he commented, "I feel like an emerging oil baron." A Fortune article published the same year, " Wild, Wild Qwest - The Gunslinger in Telecom," described Nacchio as a "modern-day Wyatt Earp" building a new form of telecommunications company. "People ask if we're telecom guys or Silicon Valley guys," Nacchio said in the opening paragraph. "I like to say we are a Silicon Valley company on the other side of the Rockies."

Hubris, defined as excessive self-confidence or pride, leads CEOs to make overly risky bets or to ignore relevant warning signs.

In 2000, Nacchio made a seemingly prescient and bold strategic bet - one that gained kudos at the time, but also indicated that his narcissism was growing. After rumors suggested that larger telephone companies were ready to acquire Qwest, he turned the tables by initiating a hostile takeover of US West. This $45.2 billion acquisition sent Qwest's stock reeling, but Nacchio remained confident. He could, after all, claim that his acquisitions had tripled Qwest's annual revenue, to $3.9 billion.

Yet by 2001 the company's growth had slowed and it had lost several major government contracts. Nacchio was facing criticism related to his compensation, which, according to the New York Times, included a $1.2 million base salary and an estimated $86 million in bonuses and stock options. In the May shareholder meeting, he was unrepentant, reportedly stating, "I know they are big numbers, but I'm neither apologizing for it nor am I embarrassed for it." When questions of accounting irregularities arose, he conceded nothing. "You all think we cheat and lie and steal, obviously," he told investors at a Goldman Sachs conference in October 2001. "Therefore, you trade us at a discount to what a normal company with great revenue and great growth should be traded. And I'm not going to convince you on that. We'll just let the numbers speak for themselves."

Despite his braggadocio, Nacchio had initiated a flurry of personal stock sales totaling more than $100 million from January through May of 2001, when the stock hovered near $40 per share. When Nacchio resigned under board pressure in June 2002, the stock price had dropped to around $4 per share. In 2007, Nacchio was convicted on 19 of 42 counts of insider trading and sentenced to prison. The conviction also cost him more than $60 million in forfeited trading profits and fines. Furthermore, the company ended up paying $250 million in fines to the SEC to address the charge that it had booked billions in false revenues over several years.

Released from prison in 2013, Nacchio remains unrepentant and wealthy (prosecutors valued his net worth at $500 million at the time of his trial). He claims that the National Security Agency engineered his SEC conviction because Qwest wouldn't cooperate with the agency's surveillance programs. Even if his claim is correct, there is no question that his narcissism, and the way he expressed it, made it much more difficult for him, and his company, to navigate successfully through the turbulence that he in part created.

Dangers of Dismissiveness

A second negative sign among potential CEOs, dismissiveness, represents a subtler but equally important indicator of trouble. A dismissive executive is one who takes on unwarranted risk by ignoring input from others.

In-group bias, a concept credited to psychologist William Sumner, is often the root cause of dismissiveness. Although Sumner did not intend to describe business groups, his assertion, made more than a century ago, sounds eerily descriptive of some corporate cultures: "Each group nourishes its own pride and vanity, boasts itself superior, exists in its own divinities, and looks with contempt on outsiders." Pride and confidence, when exhibited either in a group or in an individual, are not inherently problematic. But those attitudes can be destructive when they lead business executives to ignore competitive threats or conflicting opinions. A dismissive attitude suggests overconfidence and potentially a lack of healthy debate.

The bankruptcy of the Schwinn bicycle company under the leadership of the fourth-generation CEO, Edward R. Schwinn Jr., offers a cautionary tale. Founded in 1895 by his great-grandfather, a German-born bicycle innovator, the Schwinn company became the dominant U.S. bicycle maker by the middle of the 20th century. One in every four bicycles sold in the U.S. was a Schwinn.

Schwinn's original success came through process and product innovation. Though there were hundreds of bicycle makers when company patriarch Ignaz Schwinn teamed with Adolph Arnold, a fellow German immigrant and wealthy meat packer, the company wisely invested in mass production and nationwide distribution while competitors continued to distribute locally and produce bicycles with artisanal methods. After a few decades in business, Schwinn stood as the preeminent brand for low-cost, functional transportation for children and adults alike.

But at its peak, Schwinn began to coast. It lost its focus on innovation and willingness to invest in manufacturing. For example, in the 1970s, innovators on the West Coast modified Schwinn cruisers with gearing from European-designed bikes to create a whole new category, the "mountain bike" (which they initially called a "klunker"). According to the book No Hands: The Rise and Fall of the Schwinn Bicycle Company, an American Institution, by Judith Crown and Glenn Coleman (Henry Holt, 1996), Ed Schwinn Jr.'s dismissiveness of three new ideas - automated factories, dirt bikes, and mountain bikes - prevented the company from meeting the challenges posed by its new competitors.

Some of those competitors actually came to Schwinn seeking alliances, and were swiftly rejected. Gary Fisher, cofounder of the Mountain Bikes company (now part of Trek) and one of the leading entrepreneurs of the new category, had built his original models as adaptations of Schwinn bicycles. But he told the No Hands authors that when he approached the Schwinn company, its executives belittled him as an "amateur" and asserted that "We know bikes.... We know better than anybody."

The air of superiority and dismissiveness had been inculcated by the increasingly weak leaders drawn from the Schwinn family. The book describes how Ed Schwinn Jr. actively suppressed debate during a meeting where a few senior executives pressed for change in the company after it had been tossed from its perch atop the domestic industry by a series of missteps. Schwinn interrupted the debate by saying, "Guys, this is not going in the direction that I wanted it to." He then ended the meeting. Within a week, the executive who had been most assertive in pushing for change had been asked to resign.

Schwinn's unwillingness to invest in manufacturing led the company to outsource to a modest Taiwanese supplier, Giant, founded in 1972. Over the next decade, Schwinn taught Giant how to make high-quality bikes. Giant then began producing for Schwinn competitors such as Trek, Colnago, and Scott. When Schwinn abandoned Giant for lower-cost Chinese suppliers in 1987, the now massive supplier began building its own brand. Today Giant makes more bicycles than any other producer in the world; it even sponsors one of the top Tour de France teams. Schwinn, on the other hand, filed for bankruptcy in 1992.

Executives are not expected to have a crystal ball, and it is fair to be skeptical of new trends that could turn out to be a passing fad. But that skepticism should be considered reasonable only after CEOs have given unfamiliar information a fair hearing. The assertion that something or someone is unworthy of serious consideration, the very definition of dismissiveness, suggests a risk of hubris. Building a culture of superiority that dismisses contrarian opinions leaves a company ill-prepared to manage the inevitable dynamics of a global economy.

Humility as a Success Predictor

On the opposite end of the spectrum, positive signals in prospective CEOs can offer investors and board members great comfort. For example, visible signs of personal humility suggest that an executive will not fall victim to hubris.

Humility may seem rare among successful people and companies, but it is more prevalent among veteran executives than you might think. They know that it can offer a powerful counterpoint to narcissism and dismissiveness. Indeed, it takes great self-confidence not to use power and influence to force compliance, and to humbly expose one's opinions to open debate. Humble executives focus on the larger vision and a broad set of stakeholders rather than their own ego. They listen to others, consider multiple points of view, and do not assume their own opinions are infallible. To be sure, nurturing humility requires patience. It often takes time for a CEO to reflect on a decision rather than leaping to the expedient solutions and self-serving explanations so common in narcissistic or dismissive cultures. Here we can look to Honda for an example.

Soichiro Honda's first successful business, Tokai Seiki, supplied piston rings to Toyota prior to World War II and was acquired by the carmaker in 1945. Over the ensuing years he established the Honda Motor Company, which morphed from a moped maker to a motorcycle manufacturer to a car company.

Soichiro Honda's implementation of an informal, unstructured management style established a culture that embodied his personal belief that success is 99 percent failure. This in itself exemplified humility. The lean manufacturing culture, so natural in Japanese companies, helped Honda establish a consensus-oriented culture that promoted humility. To be sure, some argue that this approach can lead to in-group bias. But as an observer and practitioner of the total quality and just-in-time revolution of the 1980s, I have seen firsthand how the humility embedded in lean management practices can systematically lead people to question and test their biases. Honda has practiced lean principles for decades and continues to follow the principles articulated by its humble founder: Proceed always with ambition and youthfulness; respect sound theory, develop fresh ideas, and make the most effective use of them; enjoy your work and always brighten your working atmosphere; strive constantly for a harmonious flow of work; be ever mindful of the value of research and endeavor.

My visit to Honda's Marysville, Ohio, operations in the 1990s drove this home for me in a compelling way. Unlike other automotive companies I had visited over the years, Honda personified humility by disregarding hierarchy and pedigree. Although I had read about the egalitarian precepts of the Japanese "Theory Z" management style, I was mesmerized when I stepped into the Honda America headquarters. The building was made up of large spaces full of desks staffed with hundreds of white-collar workers wearing the same style of jumpsuits as the factory workers in the attached building. They symbolically identified themselves as one with the rest of the staff, decades before companies began moving to open-space architecture.

My interactions with senior managers reinforced the humble image: Rather than hard-charging MBAs or Ivy League graduates, headquarters was staffed by smart, down-to-earth managers with an industrious, Midwestern work ethic. Probed about the company's phenomenal success, they pointed to Honda's philosophy sangen shugi, loosely translated as "going to the spot." Soichiro Honda operationalized the concept in the U.S. through adherence to the "three realities" - actual place, actual part, and actual situation - as the foundation of problem solving. Honda managers would not sit behind a desk and bark out orders. Instead they went to the spot, be it their own manufacturing floor or that of their suppliers, to observe and collect hard data to find the root cause of a problem.

Successful executives rise through the ranks by understanding strategic challenges that are not evident to the average employee, but their lofty position also isolates them from critical frontline challenges. Humble executives listen to the front line and integrate that insight into strategy rather than pulling rank and assuming they know better than everyone else.

The Power of Inquisitiveness

A culture of inquisitiveness is even more powerful than humility in reducing hubris. Inquisitiveness provides the greatest defense against risky business bets. The best chief executives lead with high confidence this way. They combine intellectual curiosity with a passionate pursuit of facts. They don't accept assertions but instead challenge their people to support recommendations with rigorous evidence. An inquisitive executive typically has a great gut instinct and strategic mind-set and treats all assumptions - including his or her own - as hypotheses to be tested rather than bold, strategic visions to be imposed. Inquisitive leaders can be inventive and they will make big bets, but only when they have built the organizational confidence that the opportunity is worth the risk.

In Silicon Valley, the "lean startup" movement has established inquisitiveness as a day-to-day practice, through a focus on releasing products rapidly, observing real-world customer response to them, and changing direction as needed. Eric Reis, who coined the term lean startup, found inspiration in a variety of places. One source was the work of Steve Blank, a venture investor, entrepreneur, and academic, who invested in a startup founded by Reis called IMVU. Reis integrated Blank's customer development methodology, which is based on in-depth inquiry, with his own experience of agile software development and appreciation of world-class manufacturers such as Honda and Toyota. The lean startup movement frames failure as a positive output of experimentation and encourages "pivoting" to a better path when a trial fails. Proponents do not apply a classic "batting average" mind-set, but instead measure progress by continually asking "what have we learned?" The aspiration to fail fast makes it hard to be narcissistic or dismissive, because there is always a great deal of evidence from real-world launches and trials, which makes it easier to temper your biases.

Although now well beyond the startup phase, Amazon also continues to display this inquisitive mind-set. In 1996, Jeff Bezos established the vision for Amazon to be the world's most customer-centric company, and to manage for the long term. If you're a shareholder, you probably know that Bezos reprints his original shareholder letter articulating that vision in every annual report. His 2016 letter offered a perspective on how to avoid hubris: "I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable.... We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs."

Bezos has surrounded himself with highly motivated, competitive individuals with justified self-confidence. Simultaneously, though, he has created an organization relatively immune to hubris. His inquisitive nature translates to a desire to learn from others.

This was exhibited in a widely celebrated way with acquisition of Zappos. Many analysts, myself included, assumed that Bezos bought the online shoe retailer with a plan to apply unmatched expertise and scale in fulfillment operations to convert a marginally profitable business into a winner. Instead, Bezos publicly explained that the Zappos acquisition offered a learning opportunity because it shared the same customer obsession - but had a fundamentally different focus. Amazon sought to serve customers by offering the lowest possible prices whereas Zappos, under CEO Tony Hsieh, articulated a customer service passion for "delivering happiness."

An inquisitive nature leads to ongoing learning and offers the best defense to hubris. Inquisitive people and companies broadly and explicitly look for solutions to the problems no one has solved. They do not accept the status quo, nor do they waste time trying to convince others that they have all the answers.

Avoiding the Hubris Trap

Eliminating corporate hubris ultimately demands a culture that keeps confidence in check. Company leaders must not believe they are infallible, particularly when making "bet the farm" decisions. Truly innovative leaders don't assume they know, better than anyone else, how to handle every situation. Instead, they seek to learn by making small bets and constantly adjusting in response to the findings.

If you are a chief executive yourself (or an aspiring one), it may take some discipline to avoid the hubris trap. Don't spend your time reading articles praising your business acumen. Instead, study the reports of the short sellers who question your business strategy. As a member of a board of directors, hire outside consultants (or even academics) and charge them with the task of identifying the weaknesses in your business strategy. Find a way to challenge your assumptions.

Another preventive measure is to build diversity in your teams. Management teams with common backgrounds and perspectives can yield rapid, efficient decision making. But quick decisions made by groups with too much uniformity can filter data that does not fit their theories and overlook alternatives worthy of consideration. Constrained by inherent and often hidden biases, they may simply lack the ability to think broadly about alternatives.

Finally, avoid fueling dreams tied purely to financial success rather than a fulfilling mission. Does the long-term plan emphasize goals such as achieving the top market capitalization in the industry rather than articulating the strategic rationale, such as taking the industry in a new direction? Too many CEOs and their boards fall prey to a hubris built on short-term financial metrics, ignoring the reality that stock market success often proves fleeting. Instead of following their example, you can build an organization that instills pride and enables you to execute your strategy with the right amount of confidence.

Reprint No. 17107

Author Profile:

Tim Laseter is an advisor to executives for Strategy&, PwC's strategy consulting business. He is a managing director with PwC US, based in Arlington, Va.; a contributing editor of strategy+business; and a professor of practice at the University of Virginia's Darden School. He is the author or coauthor of four books, including The Portable MBA (Wiley, 2010).

This article draws upon unpublished research by a team of faculty at the University of Virginia's Darden School of Business, including Yiorgos Allayannis, Sam Bodily, Ken Eades, Greg Fairchild, Luanne Lynch, Dan Murphy, Frank Warnock, and Tim Laseter.

The details about Joseph Nacchio come from the Denver Post (Dec. 23, 2005), the New York Times (June 17, 2002) and CNN Money (June 17, 2002); Reuters (May 12, 2011); the Washington Post (Sept. 30, 2013); and NPR's Marketwatch (Apr. 3, 2014).

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A version of this article appeared in the Spring 2017 issue of strategy+business. It is rare for a week to pass without a newspaper or magazine offering a tale of the mistaken path of a fallen business executive, quoting critics who explain the errors that led to the failure.

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Authors Katty Kay and Claire Shipman provide evidence that "confidence matters as much as competence" in the workplace

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Evidence shows that women are less self-assured than men-and that to succeed, confidence matters as much as competence. Here's why, and what to do about it.

F or years, we women have kept our heads down and played by the rules. We've been certain that with enough hard work, our natural talents would be recognized and rewarded.

We've made undeniable progress. In the United States, women now earn more college and graduate degrees than men do. We make up half the workforce, and we are closing the gap in middle management. Half a dozen global studies, conducted by the likes of Goldman Sachs and Columbia University, have found that companies employing women in large numbers outperform their competitors on every measure of profitability. Our competence has never been more obvious. Those who closely follow society's shifting values see the world moving in a female direction.

And yet, as we've worked, ever diligent, the men around us have continued to get promoted faster and be paid more. The statistics are well known: at the top, especially, women are nearly absent, and our numbers are barely increasing. Half a century since women first forced open the boardroom doors, our career trajectories still look very different from men's.

Reader Responses
Excerpts from comments posted to this story:
"When most women, however accomplished and intelligent they may really be, attempt to demonstrate confidence by (consciously or unconsciously) trying to imitate male confidence, it all too often comes across wrong, like a singer hitting a wrong note."
- Rozzer

"The best advice as I can give you as someone who started out with no confidence and has been in the workforce for 8 years now, is fake it 'til you make it."
- Kiki

"The great irony is that women have more of the natural traits of real confidence than men. Typically speaking, men have a propensity to be overconfident, leaving them irrelevant and exposed to failure more often than they should."
- Steven Smith

"I had quite a few stare-downs with folks who thought I was being unseemly and it did cost me, but ultimately, the trade was worth it. If I had to pick, I'd rather be a witch than shut out."
- anewleaf
Read all comments

Some observers say children change our priorities, and there is some truth in this claim. Maternal instincts do contribute to a complicated emotional tug between home and work lives, a tug that, at least for now, isn't as fierce for most men. Other commentators point to cultural and institutional barriers to female success. There's truth in that, too. But these explanations for a continued failure to break the glass ceiling are missing something more basic: women's acute lack of confidence.

The elusive nature of confidence has intrigued us ever since we started work on our 2009 book, Womenomics, which looked at the many positive changes unfolding for women. To our surprise, as we talked with women, dozens of them, all accomplished and credentialed, we kept bumping up against a dark spot that we couldn't quite identify, a force clearly holding them back. Why did the successful investment banker mention to us that she didn't really deserve the big promotion she'd just got? What did it mean when the engineer who'd been a pioneer in her industry for decades told us offhandedly that she wasn't sure she was really the best choice to run her firm's new big project? In two decades of covering American politics as journalists, we realized, we have between us interviewed some of the most influential women in the nation. In our jobs and our lives, we walk among people you would assume brim with confidence. And yet our experience suggests that the power centers of this nation are zones of female self-doubt-that is, when they include women at all.

We know the feeling firsthand. Comparing notes about confidence over dinner one night last year, despite how well we knew each other, was a revelation. Katty got a degree from a top university, speaks several languages, and yet had spent her life convinced that she just wasn't intelligent enough to compete for the most-prestigious jobs in journalism. She still entertained the notion that her public profile in America was thanks to her English accent, which surely, she suspected, gave her a few extra IQ points every time she opened her mouth.

Claire found that implausible, laughable really, and yet she had a habit of telling people she was "just lucky"-in the right place at the right time-when asked how she became a CNN correspondent in Moscow while still in her 20s. And she, too, for years, routinely deferred to the alpha-male journalists around her, assuming that because they were so much louder, so much more certain, they just knew more. She subconsciously believed that they had a right to talk more on television. But were they really more competent? Or just more self-assured?

We began to talk with other highly successful women, hoping to find instructive examples of raw, flourishing female confidence. But the more closely we looked, the more we instead found evidence of its shortage.

The All-Star WNBA player Monique Currie, of the Washington Mystics, displays dazzling agility and power on the basketball court. On the subject of confidence, however, she sounded disconcertingly like us. Currie rolled her eyes when we asked whether her wellspring of confidence was as deep as that of a male athlete. "For guys," she said, in a slightly mystified, irritated tone, "I think they have maybe 13- or 15-player rosters, but all the way down to the last player on the bench, who doesn't get to play a single minute, I feel like his confidence is just as big as the superstar of the team." She smiled and shook her head. "For women, it's not like that."

The tech entrepreneur Clara Shih, who founded the successful social-media company Hearsay Social in 2010 and joined the board of Starbucks at the tender age of 29, is one of the few female CEOs in the still-macho world of Silicon Valley. But as an undergrad at Stanford, she told us, she was convinced that courses she found difficult were easy for others. Although Shih would go on to graduate with the highest GPA of any computer-science major in her class, she told us that at times she "felt like an imposter." As it happens, this is essentially what Facebook COO Sheryl Sandberg told us a year before her book, Lean In, was published: "There are still days I wake up feeling like a fraud, not sure I should be where I am."

We were inspired by these conversations, and many more, to write a book on the subject, with a particular eye to whether a lack of confidence might be holding women back. We ended up covering much more territory than we'd originally anticipated, ranging from the trait's genetic components to how it manifests itself in animals to what coaches and psychologists have learned about cultivating it. Much of what we discovered turns out to be relevant to both women and men.

Even as our understanding of confidence expanded, however, we found that our original suspicion was dead-on: there is a particular crisis for women-a vast confidence gap that separates the sexes. Compared with men, women don't consider themselves as ready for promotions, they predict they'll do worse on tests, and they generally underestimate their abilities. This disparity stems from factors ranging from upbringing to biology.

A growing body of evidence shows just how devastating this lack of confidence can be. Success, it turns out, correlates just as closely with confidence as it does with competence. No wonder that women, despite all our progress, are still woefully underrepresented at the highest levels. All of that is the bad news. The good news is that with work, confidence can be acquired. Which means that the confidence gap, in turn, can be closed.

The shortage of female confidence is increasingly well quantified and well documented. In 2011, the Institute of Leadership and Management, in the United Kingdom, surveyed British managers about how confident they feel in their professions. Half the female respondents reported self-doubt about their job performance and careers, compared with fewer than a third of male respondents.

Linda Babcock, a professor of economics at Carnegie Mellon University and the author of Women Don't Ask, has found, in studies of business-school students, that men initiate salary negotiations four times as often as women do, and that when women do negotiate, they ask for 30 percent less money than men do. At Manchester Business School, in England, professor Marilyn Davidson has seen the same phenomenon, and believes that it comes from a lack of confidence. Each year she asks her students what they expect to earn, and what they deserve to earn, five years after graduation. "I've been doing this for about seven years," she has written, "and every year there are massive differences between the male and female responses." On average, she reports, the men think they deserve $80,000 a year and the women $64,000-or 20 percent less.

A meticulous 2003 study by the Cornell psychologist David Dunning and the Washington State University psychologist Joyce Ehrlinger homed in on the relationship between female confidence and competence. At the time, Dunning and a Cornell colleague, Justin Kruger, were just finishing their seminal work on something that's since been dubbed the Dunning-Kruger effect: the tendency for some people to substantially overestimate their abilities. The less competent people are, the more they overestimate their abilities-which makes a strange kind of sense.

Dunning and Ehrlinger wanted to focus specifically on women, and the impact of women's preconceived notions about their own ability on their confidence. They gave male and female college students a quiz on scientific reasoning. Before the quiz, the students rated their own scientific skills. "We wanted to see whether your general perception of Am I good in science? shapes your impression of something that should be separate: Did I get this question right?," Ehrlinger said. The women rated themselves more negatively than the men did on scientific ability: on a scale of 1 to 10, the women gave themselves a 6.5 on average, and the men gave themselves a 7.6. When it came to assessing how well they answered the questions, the women thought they got 5.8 out of 10 questions right; men, 7.1. And how did they actually perform? Their average was almost the same-women got 7.5 out of 10 right and men 7.9.

To show the real-world impact of self-perception, the students were then invited-having no knowledge of how they'd performed-to participate in a science competition for prizes. The women were much more likely to turn down the opportunity: only 49 percent of them signed up for the competition, compared with 71 percent of the men. "That was a proxy for whether women might seek out certain opportunities," Ehrlinger told us. "Because they are less confident in general in their abilities, that led them not to want to pursue future opportunities."

In studies, men overestimate their abilities and performance, and women underestimate both. Their performances do not differ in quality.

Talking with Ehrlinger, we were reminded of something Hewlett-Packard discovered several years ago, when it was trying to figure out how to get more women into top management positions. A review of personnel records found that women working at HP applied for a promotion only when they believed they met 100 percent of the qualifications listed for the job. Men were happy to apply when they thought they could meet 60 percent of the job requirements. At HP, and in study after study, the data confirm what we instinctively know. Underqualified and underprepared men don't think twice about leaning in. Overqualified and overprepared, too many women still hold back. Women feel confident only when they are perfect. Or practically perfect.

Brenda Major, a social psychologist at the University of California at Santa Barbara, started studying the problem of self-perception decades ago. "As a young professor," she told us, "I would set up a test where I'd ask men and women how they thought they were going to do on a variety of tasks." She found that the men consistently overestimated their abilities and subsequent performance, and that the women routinely underestimated both. The actual performances did not differ in quality. "It is one of the most consistent findings you can have," Major says of the experiment. Today, when she wants to give her students an example of a study whose results are utterly predictable, she points to this one.

On the other side of the country, the same thing plays out every day in Victoria Brescoll's lecture hall at Yale's School of Management. M.B.A. students are nurtured specifically to project confidence in the fashion demanded by today's business world. But although all of her students are top-of-the-chart smart, she's been startled to uncover her female students' lack of belief in themselves.

"There's just a natural sort of feeling among the women that they will not get a prestigious job, so why bother trying," she explained. "Or they think that they are not totally competent in the area, so they're not going to go for it." As a result, female students tend to opt out. "They end up going into less competitive fields, like human resources or marketing," she said. "They don't go for finance, investment banks, or senior-track faculty positions."
Do men doubt themselves sometimes? Of course. But they don't let their doubts stop them as often as women do.
And the men?

"I think that's really interesting," Brescoll said with a laugh, "because the men go into everything just assuming that they're awesome and thinking, Who wouldn't want me? "

Do men doubt themselves sometimes? Of course. But not with such exacting and repetitive zeal, and they don't let their doubts stop them as often as women do. If anything, men tilt toward overconfidence-and we were surprised to learn that they come by that state quite naturally. They aren't consciously trying to fool anyone. Ernesto Reuben, a professor at Columbia Business School, has come up with a term for this phenomenon: honest overconfidence. In a study he published in 2011, men consistently rated their performance on a set of math problems to be about 30 percent better than it was.

We were curious to find out whether male managers were aware of a confidence gap between male and female employees. And indeed, when we raised the notion with a number of male executives who supervised women, they expressed enormous frustration. They said they believed that a lack of confidence was fundamentally holding back women at their companies, but they had shied away from saying anything, because they were terrified of sounding sexist. One male senior partner at a law firm told us the story of a young female associate who was excellent in every respect, except that she didn't speak up in client meetings. His takeaway was that she wasn't confident enough to handle the client's account. But he didn't know how to raise the issue without causing offense. He eventually concluded that confidence should be a formal part of the performance-review process, because it is such an important aspect of doing business.

The fact is, overconfidence can get you far in life. Cameron Anderson, a psychologist who works in the business school at the University of California at Berkeley, has made a career of studying overconfidence. In 2009, he conducted some novel tests to compare the relative value of confidence and competence. He gave a group of 242 students a list of historical names and events, and asked them to tick off the ones they knew.

Among the names were some well-disguised fakes: a Queen Shaddock made an appearance, as did a Galileo Lovano, and an event dubbed Murphy's Last Ride. The experiment was a way of measuring excessive confidence, Anderson reasoned. The fact that some students checked the fakes instead of simply leaving them blank suggested that they believed they knew more than they actually did. At the end of the semester, Anderson asked the students to rate one another in a survey designed to assess each individual's prominence within the group. The students who had picked the most fakes had achieved the highest status.

Confidence, Anderson told us, matters just as much as competence. We didn't want to believe it, and we pressed him for alternative theories. But deep down, we knew we'd seen the same phenomenon for years. Within any given organization, be it an investment bank or the PTA, some individuals tend to be more admired and more listened to than others. They are not necessarily the most knowledgeable or capable people in the room, but they are the most self-assured.

"When people are confident, when they think they are good at something, regardless of how good they actually are, they display a lot of confident nonverbal and verbal behavior," Anderson said. He mentioned expansive body language, a lower vocal tone, and a tendency to speak early and often in a calm, relaxed manner. "They do a lot of things that make them look very confident in the eyes of others," he added. "Whether they are good or not is kind of irrelevant." Kind of irrelevant. Infuriatingly, a lack of competence doesn't necessarily have negative consequences. Among Anderson's students, those who displayed more confidence than competence were admired by the rest of the group and awarded a high social status. "The most confident people were just considered the most beloved in the group," he said. "Their overconfidence did not come across as narcissistic."

That is a crucial point. True overconfidence is not mere bluster. Anderson thinks the reason extremely confident people don't alienate others is that they aren't faking it. They genuinely believe they are good, and that self-belief is what comes across. Fake confidence, he told us, just doesn't work in the same way. Studies Anderson is now conducting suggest that others can see the "tells." No matter how much bravado someone musters, when he doesn't genuinely believe he is good, others pick up on his shifting eyes and rising voice and other giveaways. Most people can spot fake confidence from a mile away.

Women applied for a promotion only when they met 100 percent of the qualifications. Men applied when they met 50 percent.

Once we got over our feeling that Anderson's work suggests a world that is deeply unfair, we could see a useful lesson: For decades, women have misunderstood an important law of the professional jungle. It's not enough to keep one's head down and plug away, checking items off a list. Having talent isn't merely about being competent; confidence is a part of that talent. You have to have it to excel.

We also began to see that a lack of confidence informs a number of familiar female habits. Take the penchant many women have for assuming the blame when things go wrong, while crediting circumstance-or other people-for their successes. (Men seem to do the opposite.) David Dunning, the Cornell psychologist, offered the following case in point: In Cornell's math Ph.D. program, he's observed, there's a particular course during which the going inevitably gets tough. Dunning has noticed that male students typically recognize the hurdle for what it is, and respond to their lower grades by saying, "Wow, this is a tough class." That's what's known as external attribution, and in a situation like this, it's usually a healthy sign of resilience. Women tend to respond differently. When the course gets hard, Dunning told us, their reaction is more likely to be "You see, I knew I wasn't good enough." That's internal attribution, and it can be debilitating.

Perfectionism is another confidence killer. Study after study confirms that it is largely a female issue, one that extends through women's entire lives. We don't answer questions until we are totally sure of the answer, we don't submit a report until we've edited it ad nauseam, and we don't sign up for that triathlon unless we know we are faster and fitter than is required. We watch our male colleagues take risks, while we hold back until we're sure we are perfectly ready and perfectly qualified. We fixate on our performance at home, at school, at work, at yoga class, even on vacation. We obsess as mothers, as wives, as sisters, as friends, as cooks, as athletes. Bob Sullivan and Hugh Thompson, the authors of The Plateau Effect, call this tendency the "enemy of the good," leading as it does to hours of wasted time. The irony is that striving to be perfect actually keeps us from getting much of anything done.

So where does all of this start? If women are competent and hardworking enough to outpace men in school, why is it so difficult to keep up later on? As with so many questions involving human behavior, both nature and nurture are implicated in the answers.

The very suggestion that male and female brains might be built differently and function in disparate ways has long been a taboo subject among women, out of fear that any difference would be used against us. For decades-for centuries, actually-differences (real or imagined) were used against us. So let's be clear: male and female brains are vastly more alike than they are different. You can't look at scans of two random brains and clearly identify which is male and which is female. Moreover, each individual's confidence level is influenced by a host of genetic factors that do not seem to have anything to do with his or her sex.

Girls lose confidence, so they quit competing in sports, thereby depriving themselves of one of the best ways to regain it.

Yet male and female brains do display differences in structure and chemistry, differences that may encourage unique patterns of thinking and behavior, and that could thereby affect confidence. This is a busy area of inquiry, with a steady stream of new-if frequently contradictory, and controversial-findings. Some of the research raises the intriguing possibility that brain structure could figure into variations between the way men and women respond to challenging or threatening circumstances. Take, for example, the amygdalae, sometimes described as the brain's primitive fear centers. They are involved in processing emotional memory and responding to stressful situations. Studies using fMRI scans have found that women tend to activate their amygdalae more easily in response to negative emotional stimuli than men do-suggesting that women are more likely than men to form strong emotional memories of negative events. This difference seems to provide a physical basis for a tendency that's been observed in behavioral studies: compared with men, women are more apt to ruminate over what's gone wrong in the past. Or consider the anterior cingulate cortex. This little part of the brain helps us recognize errors and weigh options; some people call it the worrywart center. And, yes, it's larger in women. In evolutionary terms, there are undoubtedly benefits to differences like these: women seem to be superbly equipped to scan the horizon for threats. Yet such qualities are a mixed blessing today.

You could say the same about hormonal influences on cognition and behavior. We all know testosterone and estrogen as the forces behind many of the basic, overt differences between men and women. It turns out they are involved in subtler personality dynamics as well. The main hormonal driver for women is, of course, estrogen. By supporting the part of the brain involved in social skills and observations, estrogen seems to encourage bonding and connection, while discouraging conflict and risk taking-tendencies that might well hinder confidence in some contexts.

Testosterone, on the other hand, helps to fuel what often looks like classic male confidence. Men have about 10 times more testosterone pumping through their system than women do, and it affects everything from speed to strength to muscle size to competitive instinct. It is thought of as the hormone that encourages a focus on winning and demonstrating power, and for good reason. Recent research has tied high testosterone levels to an appetite for risk taking. In a series of studies, scientists from Cambridge University followed male traders at a London hedge fund, all high rollers (with annual bonuses greater than $5 million). Using saliva samples, the researchers measured the men's testosterone levels at the start and end of each day. On days when traders began with higher levels of testosterone, they made riskier trades. When those trades paid off, their testosterone levels surged further. One trader saw his testosterone level rise 74 percent over a six-day winning streak.
"If life were one long grade school, women would be the undisputed rulers of the world."
There's a downside to testosterone, to be sure. As we've just seen, higher levels of the hormone fuel risk taking, and winning yields still more testosterone. This dynamic, sometimes known as the "winner effect," can be dangerous: animals can become so aggressive and overconfident after winning fights that they take fatal risks. Moreover, a testosterone-laced decision isn't always a better one. In research conducted at University College London, women who were given testosterone were less able to collaborate, and wrong more often. And several studies of female hedge-fund managers show that taking the longer view and trading less can pay off: investments run by female hedge-fund managers outperform those run by male managers.

So what are the implications of all this? The essential chicken-and-egg question still to be answered is to what extent these differences between men and women are inherent, and to what extent they are a result of life experiences. The answer is far from clear-cut, but new work on brain plasticity is generating growing evidence that our brains do change in response to our environment. Even hormone levels may be less preordained than one might suppose: researchers have found that testosterone levels in men decline when they spend more time with their children.

For some clues about the role that nurture plays in the confidence gap, let's look to a few formative places: the elementary-school classroom, the playground, and the sports field. School is where many girls are first rewarded for being good, instead of energetic, rambunctious, or even pushy. But while being a "good girl" may pay off in the classroom, it doesn't prepare us very well for the real world. As Carol Dweck, a Stanford psychology professor and the author of Mindset: The New Psychology of Success, put it to us: "If life were one long grade school, women would be the undisputed rulers of the world."

It's easier for young girls than for young boys to behave: As is well established, they start elementary school with a developmental edge in some key areas. They have longer attention spans, more-advanced verbal and fine-motor skills, and greater social adeptness. They generally don't charge through the halls like wild animals, or get into fights during recess. Soon they learn that they are most valuable, and most in favor, when they do things the right way: neatly and quietly. "Girls seem to be more easily socialized," Dweck says. "They get a lot of praise for being perfect." In turn, they begin to crave the approval they get for being good. There's certainly no harm intended by overworked, overstressed teachers (or parents). Who doesn't want a kid who works hard and doesn't cause a lot of trouble?

What doomed the women was not their actual ability to do well on the tests. They were as able as the men were. What held them back was the choice not to try.

And yet the result is that many girls learn to avoid taking risks and making mistakes. This is to their detriment: many psychologists now believe that risk taking, failure, and perseverance are essential to confidence-building. Boys, meanwhile, tend to absorb more scolding and punishment, and in the process, they learn to take failure in stride. "When we observed in grade school classrooms, we saw that boys got eight times more criticism than girls for their conduct," Dweck writes in Mindset. Complicating matters, she told us, girls and boys get different patterns of feedback. "Boys' mistakes are attributed to a lack of effort," she says, while "girls come to see mistakes as a reflection of their deeper qualities."

Boys also benefit from the lessons they learn-or, more to the point, the lessons they teach one another-during recess and after school. From kindergarten on, they roughhouse, tease one another, point out one another's limitations, and call one another morons and slobs. In the process, Dweck contends, such evaluations "lose a lot of their power." Boys thus make one another more resilient. Other psychologists we spoke with believe that this playground mentality encourages them later, as men, to let other people's tough remarks slide off their backs. Similarly, on the sports field, they learn not only to relish wins but also to flick off losses.

Too many girls, by contrast, miss out on really valuable lessons outside of school. We all know that playing sports is good for kids, but we were surprised to learn just how extensive the benefits are, and how relevant to confidence. Studies evaluating the impact of the 1972 Title IX legislation, which made it illegal for public schools to spend more on boys' athletics than on girls', have found that girls who play team sports are more likely to graduate from college, find a job, and be employed in male-dominated industries. There's even a direct link between playing sports in high school and earning a bigger salary as an adult. Learning to own victory and survive defeat in sports is apparently good training for owning triumphs and surviving setbacks at work. And yet, despite Title IX, fewer girls than boys participate in athletics, and many who do quit early. According to the Centers for Disease Control and Prevention, girls are still six times as likely as boys to drop off sports teams, with the steepest decline in participation coming during adolescence. This is probably because girls suffer a larger decrease in self-esteem during that time than do boys.

What a vicious circle: girls lose confidence, so they quit competing, thereby depriving themselves of one of the best ways to regain it. They leave school crammed full of interesting historical facts and elegant Spanish subjunctives, proud of their ability to study hard and get the best grades, and determined to please. But somewhere between the classroom and the cubicle, the rules change, and they don't realize it. They slam into a work world that doesn't reward them for perfect spelling and exquisite manners. The requirements for adult success are different, and their confidence takes a beating.

Consider the following tale of two employees. A female friend of ours in New York was supervising two 20‑something junior staffers, one female (whom we will call Rebecca) and one male (whom we will call Robert). Even though Robert had been on the job for only a few months, he was already stopping by our friend's office to make off-the-cuff pitches for new ad campaigns, to comment on business strategy, and to share unsolicited opinions about magazine articles he'd recently read. Our friend often found herself shooting down his ideas, correcting his misperceptions, and sending him off for further research. "No problem" seemed to be his attitude. Sometimes he'd respond with a counterargument; other times, he'd grin and shrug his shoulders as he headed back to his desk. A few days later, he'd be back in to pitch more ideas and to update her on what he was doing, even if all he had to say was "I'm still working on this."

Our friend was struck by how easily Robert engaged her, and how markedly different his behavior was from that of Rebecca, with whom she'd worked for several years. Rebecca still made appointments to speak with her and always prepared a list of issues for their discussions. She was mostly quiet in meetings with clients, focused as she was on taking careful notes. She never blurted out her ideas; she wrote them up with comprehensive analyses of pros and cons. Rebecca was prepared and hardworking, and yet, even though our friend was frequently annoyed by Robert's assertiveness, she was more impressed by him. She admired his willingness to be wrong and his ability to absorb criticism without being discouraged. Rebecca, by contrast, took negative feedback hard, sometimes responding with tears and a trip to her own office to collect herself before the conversation could continue.
If a woman speaks up first at meetings, she risks being disliked or even-let's be blunt-being labeled a bitch.
Our friend had come to rely on and value Rebecca, but she had a feeling it was Robert's star that would rise. It was only a matter of time before one of his many ideas would strike the right note, and he'd be off and running-probably, our friend was beginning to fear, while Rebecca was left behind, enjoying the respect of her colleagues but not a higher salary, more responsibilities, or a more important title.

Here's a thorny question: If Rebecca did behave just like Robert, exhibiting his kind of confidence, what would her boss think then? There is evidence that Rebecca wouldn't fare so well, whether her boss was male or female.

Which is why any discussion of this subject requires a major caveat. Yes, women suffer consequences for their lack of confidence-but when they do behave assertively, they may suffer a whole other set of consequences, ones that men don't typically experience. Attitudes toward women are changing, and for the better, but a host of troubling research shows that they can still pay a heavier social and even professional penalty than men do for acting in a way that's seen as aggressive. If a woman walks into her boss's office with unsolicited opinions, speaks up first at meetings, or gives business advice above her pay grade, she risks being disliked or even-let's be blunt-being labeled a bitch. The more a woman succeeds, the worse the vitriol seems to get. It's not just her competence that's called into question; it's her very character.

Back at the Yale School of Management, Victoria Brescoll has tested the thesis that the more senior a woman is, the more she makes a conscious effort to play down her volubility-the reverse of how most men handle power. In the first of two experiments, she asked 206 participants, both men and women, to imagine themselves as either the most senior figure or the most junior figure in a meeting. Then she asked them how much they'd talk. Those men who'd imagined themselves as the senior figure reported that they would talk more; men who'd picked the junior position said they'd talk less. But women who'd selected the high-ranking role said they would talk the same amount as those women who'd envisioned themselves as the low-ranking woman. Asked why, they said they didn't want to be disliked, or seem out of line. In Brescoll's next experiment, men and women rated a fictitious female CEO who talked more than other people. The result: both sexes viewed this woman as significantly less competent and less suited to leadership than a male CEO who talked for the same amount of time. When the female CEO was described as talking less than others, her perceived competency shot up.

So confident women can find themselves in a catch-22. For now, though, for Rebecca and for most women, coming across as too confident is not the problem.

When we embarked on this quest two years ago, we had a slight conflict of interest. As journalists, we were exhilarated by the puzzle of why high-achieving women were so lacking in confidence, but as women, we grew gloomy. Delving into research and interviews, we more than once found ourselves wondering whether the entire female sex was doomed to feel less than self-assured. Biology, upbringing, society: all seemed to be conspiring against women's confidence.

But as our understanding of this elusive quality shifted, we began to see the outlines of a remedy. Confidence is not, as we once believed, just feeling good about yourself. If women simply needed a few words of reassurance, they'd have commandeered the corner office long ago. Perhaps the clearest, and most useful, definition of confidence we came across was the one supplied by Richard Petty, a psychology professor at Ohio State University, who has spent decades focused on the subject. "Confidence," he told us, "is the stuff that turns thoughts into action." Of course, other factors also contribute to action. "If the action involves something scary, then what we call courage might also be needed," Petty explained. "Or if it's difficult, a strong will to persist might also be needed. Anger, intelligence, creativity can play a role." But confidence, he told us, is essential, because it applies in more situations than these other traits do. It is the factor that turns thoughts into judgments about what we are capable of, and that then transforms those judgments into action.

The simplicity is compelling, and the notion that confidence and action are interrelated suggests a virtuous circle. Confidence is a belief in one's ability to succeed, a belief that stimulates action. In turn, taking action bolsters one's belief in one's ability to succeed. So confidence accumulates-through hard work, through success, and even through failure.
The natural result of low confidence is inaction. When women hesitate because we aren't sure, we hold ourselves back.
We found perhaps the most striking illustration of how the connection between action and confidence might play out to women's benefit in Milan. There we tracked down Zachary Estes, a research psychologist who's long been curious about the confidence disparity between men and women. A few years ago, he gave 500 students a series of tests that involved reorganizing 3‑D images on a computer screen. He was testing a couple of things-the idea that confidence can be manipulated and the idea that, in some areas, women have less of it than men.

When Estes had the students solve a series of these spatial puzzles, the women scored measurably worse than the men did. But when he looked at the results more closely, he found that the women had done poorly because they hadn't even attempted to answer a lot of the questions. So he repeated the experiment, this time telling the students they had to at least try to solve all the puzzles. And guess what: the women's scores increased sharply, matching the men's. Maddening. Yet also hopeful.

Estes's work illustrates a key point: the natural result of low confidence is inaction. When women don't act, when we hesitate because we aren't sure, we hold ourselves back. But when we do act, even if it's because we're forced to, we perform just as well as men do.

Using a different test, Estes asked everyone to answer every question. Both the men and the women got 80 percent right, suggesting identical ability levels. He then tested the students again and asked them, after each question, to report their confidence in their answer. Just having to think about whether they felt certain of their answer changed their ability to do well. The women's scores dipped to 75 percent, while the men's jumped to 93. One little nudge asking women how sure they are about something rattles their world, while the same gesture reminds men that they're terrific.

Finally, Estes decided to attempt a direct confidence boost. He told some members of the group, completely at random, that they had done very well on the previous test. On the next test they took, those men and women improved their scores dramatically. It was a clear measure of how confidence can be self-perpetuating.

These results could not be more relevant to understanding the confidence gap, and figuring out how to close it. What doomed the women in Estes's lab was not their actual ability to do well on the tests. They were as able as the men were. What held them back was the choice they made not to try.

The advice implicit in such findings is hardly unfamiliar: to become more confident, women need to stop thinking so much and just act. And yet, there is something very powerful about this prescription, aligning as it does with everything research tells us about the sources of female reticence.

Almost daily, new evidence emerges of just how much our brains can change over the course of our lives, in response to shifting thought patterns and behavior. If we keep at it, if we channel our talent for hard work, we can make our brains more confidence-prone. What the neuroscientists call plasticity, we call hope.
Katty Kay and Claire Shipman are the authors of The Confidence Code: The Science and Art of Self-Assurance-What Women Should Know.

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Evidence shows that women are less self-assured than men-and that to succeed, confidence matters as much as competence. Here's why, and what to do about it.

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Boldness in the face of evidence to the contrary can lead to disaster, such as when Morton Thiokol executives trusted their judgement over the evidence provided by their engineers, resulting in the destruction of the Challenger space shuttle.

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Just 73 seconds after launch on January 28th, 1986, the Challenger space shuttle broke apart over the coast of Florida and ended the lives of all seven crew members. A subsequent investigation determined that an O-ring failure on one of the shuttle's solid rocket boosters, coupled with extremely cold weather around the time of launch, caused the accident. 6 months prior to the launch, the following memo was sent by Roger Boisjoly - an engineer working at Morton Thiokol, the manufacturers of the solid rocket boosters - to the company's Vice President, in which he predicted the problem and warned of a potential "catastrophe of the highest order."

Boisjoly's warning went unheeded; he then attempted to halt the launch, unsuccessfully. Boisjoly later revealed this memo to the presidential commission investigating the disaster and was then forced to leave Morton Thioklol after been shunned by disgruntled colleagues. In 1988 he was awarded the AAAS Award for Scientific Freedom and Responsibility for his actions.

Transcript follows.

(This memo, along with 124 other fascinating pieces of correspondence, can be found in the bestselling book, Letters of Note. For more info, visit Books of Note.)

Morton Thiokol, Inc
Wasatch Division

Interoffice Memo

31 July 1985
2870:FY86:073

TO: R. K. Lund
Vice President, Engineering

CC: B. C. Brinton, A. J. McDonald, L. H. Sayer, J. R. Kapp

FROM: R. M. Boisjoly
Applied Mechanics - Ext. 3525

SUBJECT: SRM O-Ring Erosion/Potential Failure Criticality

This letter is written to insure that management is fully aware of the seriousness of the current O-ring erosion problem in the SRM joints from an engineering standpoint.

The mistakenly accepted position on the joint problem was to fly without fear of failure and to run a series of design evaluations which would ultimately lead to a solution or at least a significant reduction of the erosion problem. This position is now drastically changed as a result of the SRM 16A nozzle joint erosion which eroded a secondary O-ring with the primary O-ring never sealing.

If the same scenario should occur in a field joint (and it could), then it is a jump ball as to the success or failure of the joint because the secondary O-ring cannot respond to the clevis opening rate and may not be capable of pressurization. The result would be a catastrophe of the highest order - loss of human life.

An unofficial team (a memo defining the team and its purpose was never published) with leader was formed on 19 July 1985 and was tasked with solving the problem for both the short and long term. This unofficial team is essentially nonexistent at this time. In my opinion, the team must be officially given the responsibility and the authority to execute the work that needs to be done on a non-interference basis (full time assignment until completed.)

It is my honest and very real fear that if we do not take immediate action to dedicate a team to solve the problem with the field joint having the number one priority, then we stand in jeopardy of losing a flight along with all the launch pad facilities.

(Signed)

R. M. Boisjoly

Concurred by:

(Signed)

J. R. Kapp, Manager
Applied Mechanics

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Just 73 seconds after launch on January 28th, 1986, the Challenger space shuttle broke apart over the coast of Florida and ended the lives of all seven crew members. A subsequent investigation determined that an O-ring failure on one of the shuttle's solid rocket boosters, coupled with extremely cold weather around the time of launch, caused the accident.