In a study on confidence and accuracy, Lewis Goldberg asked experienced neurologists and their administrative assistants (i.e., secretaries) to diagnose brain damage among patients as being organic or non-organic damage using a standard protocol in the field. What Goldberg found, not surprisingly, was that experienced neurologists were much more confident about their diagnoses than their untrained administrative assistants, who were more used to making appointments and doing paperwork. However, although the neurologists were more confident about their diagnoses, they were not more accurate. In fact, Goldberg found that the administrative assistants had just as high a rate of accurately diagnosing organic brain damage as experienced neurologists.
What does Goldberg’s study teach us? Although we may be confident, we may not be right! And if you think this may be an isolated case, one study found that in nearly 15,000 judgments, when participants believed they were correct 98% of the time, they were wrong over 30% of the time. This kind of overconfidence can lead to big disasters, such as the Chernobyl Nuclear Disaster, the NASA Challenger explosion, or Pearl Harbor. It can also lead your startup to a big disaster.
Research also shows that complex or ambiguous settings exacerbate the overconfidence bias. Unfortunately, not only do entrepreneurs face complex, ambiguous problems, they also have an above-average dose of confidence. All of this can lead entrepreneurs into the trap of not listening and believing they are right when they are in fact wrong. In our own research we found that overconfident entrepreneurs who see themselves as “experts” are least likely to learn and change. Mike Cassidy, a serial entrepreneur who has created companies worth over a billion dollars, confessed that “the thing that scares me most is someone who is convinced they are right, because they will never change.” For entrepreneurs, Mike's statement is a pertinent word of warning.
(See Nail It Then Scale It, pgs. 48-50)