Risky Business: Calibrating confidence when making decisions

The global pandemic has transformed everyday life into a series of decisions about risk. I have a friend who, in the month after San Francisco issued its order to shelter in place, was too scared to leave his small apartment except to take two short walks.

He’s not alone. The possibility of contracting COVID-19 is terrifying. But if the fear leads my friend to hide at home for a year or more without going out, that will probably be an overreaction.

People are often systematically underconfident and don’t take chances that would be successful. We may stay home when it’s safe to go outside (provided we maintain a safe distance from others, wear a mask, and so forth). Likewise, post-pandemic, we may decline to talk to strangers who might turn into friends or avoid investments that could pay off handsomely. Our children may avoid entering an essay contest or decline a more challenging math class, either because they lowball their odds of succeeding or exaggerate the consequences of failing.

But there are also circumstances in which people are systematically overconfident. We all know people who discount the risks posed by COVID-19. My 84-year-old mother, for instance, would have happily continued taking meals with all her friends had her retirement home not closed the dining hall. And it’s common to routinely overestimate how much we can get done, winding up with a to-do list longer than any mortal could accomplish on schedule.

So how do you balance the risks of underconfidence and overconfidence?

Don’t assume that more confidence is always better. Both overconfidence and underconfidence are errors.

Do seek out accurate information about risks and opportunities. Use that information to estimate the likelihood of different possible futures, then reflect on your particular tastes and values. Nobody can predict the future, but reason and self-awareness can empower you to take risks wisely.

Don Moore is the Lorraine Tyson Mitchell Chair of Leadership and Communication at the Haas School of Business at the University of California at Berkeley and the author of the forthcoming book, Perfectly Confident. This post originally appeared in Tip of the Week — actionable advice about the science of character — from Character Lab, founded by Penn psychology professor Angela Duckworth. You can sign up to receive more at characterlab.org.