Investing

Irrationally Confident

If you couldn’t already tell, I’m not the most photogenic person in the world. See the head shot to the right of this post for an example. That photo is from 2011, I believe, when I was working at a fintech startup. I thought it was professional and decent looking enough so I’ve used it everywhere now, including this blog, my website and my Linkedin profile. Funny thing is when I was younger I used to think I was a lot better looking that I actually was/am. I thought there was no reason that any gorgeous looking woman wouldn’t want to go out with me (Side note: I did actually manage to fool a gorgeous woman to go out with and marry me).

While it took a number of years, I do now realize that I’m probably average looking….hopefully. I don’t think I was alone as a young single man in thinking that I was better looking than I actually was. As a matter of fact, I’m not sure the human species would perpetuate and be what it is today without some sort of overconfidence among men or without a reversal of the common dating and courting traditions among men and women.

Overconfidence is actually fairly common throughout the world in all sorts of arenas and can lead to irrational confidence. Politicians are the prime example in my opinion. They usually start out a bit overconfident and with time some cross the line into irrational confidence thinking they’re above the law or above societal norms and can do whatever they want. Those poor souls usually end up indicted, impeached or ignominiously driven out of public life. Young men out of college with their first jobs, feeling like they’re on top of the world can be quite irrationally confident. See my personal account above. It’s usually harmless although it can leave a lot of hurt feelings and offended people in the wake. Heat check basketball players are among the most fun of the irrationally confident bunch. You know, the guys that can shoot the ball lights out for brief periods of time but otherwise are pretty inconsistent ballplayers. They think they should take more shots than they do and that the offense should run through them. Very entertaining.

Experts and specialists tend to be overconfident and sometimes even irrationally confident. They fail to recognize their blind spots and often don’t seek out opinions and facts that conflict or are contrary to their views. It’s difficult not to be somewhat overconfident when you’re a specialist or expert in a field. We’re all guilty of it in some regard as it relates to our areas of expertise. The key is to not let it get to an irrational level.

As it relates to investing, there’s no quicker way to going broke than to be irrationally confident. The key is to know thyself and to know what you don’t know. Seek help when and where you need it. Always seek out views and opinions that conflict with yours. This shouldn’t be too hard to do given the increasing polarization of society as a whole. Be forewarned though that It’s uncomfortable because it might actually mean you’re strongest beliefs and opinions are wrong. Most of us don’t want to open ourselves up to potentially being wrong. However, seeking out information contrary to our beliefs and opinions is a critical component to any sound decision making process and investment plan. We have to make our best effort to understand reality and make decisions based on reality rather than our personal opinions and beliefs. Otherwise, we can subject ourselves to overconfidence and potentially even irrational confidence. Neither of those lead to a good place in the long run.