Written and Narrated by
Robert Prentice, J.D.
Department of Business, Government and Society
McCombs School of Business
The University of Texas at Austin
“Good character can be undermined by overconfidence. David Brooks wrote in his book, The Social Animal, that human minds are “overconfidence machines,” and the psychological literature bears that out. A substantial majority of people believe erroneously that they are better than average drivers, more likely to be able to afford to own a house than their peers, and more accurate eyewitnesses than most other people.
Entrepreneurs like Bernie Ebbers of WorldCom and Richard Scrushy of Health South, who built small, obscure companies into economic powerhouses, may gain a sense of invulnerability through a series of successes. Their minds underplay any role that luck had in their success. Indeed, a 2012 Empirical study indicated that overconfident executives with unrealistic beliefs about their future performance are more likely to commit financial reporting fraud than other executives. Essentially, they are more likely to get themselves into predicaments where committing fraud seems the only way to deliver on their promises.
People’s irrational overconfidence also applies to the ethical correctness of their acts and judgments. In one survey, more people thought that they would go to heaven than Mother Teresa would! Other individuals surveyed reported that they were twice as likely to follow the Ten Commandments as other people. In fact, 92% of Americans report that they are satisfied with their own character.
This same overconfidence manifests itself in the workplace, where impossibly high percentages of people believe that they are more ethical than their competitors and coworkers. In one study, 61% of doctors believed that the “freebies” given out by pharmaceutical companies affected the judgement of other physicians, but only 16% believed that their own judgement was similarly affected.
Most of us simply assume that we are good people and therefore we will make sound ethical decisions. This overconfidence in one’s own moral compass can lead us to make decisions without any serious ethical reflection. When hints of the Enron scandal first began to appear in the press, Enron employees’ overweening confidence in the competence and strategies of their company, often named the “most innovative” in America, caused them to express surprise and indignation that anyone would question the ethicality of many of the firm’s actions. Any outsider who questioned Enron’s tactics or numbers was told that they “just did not get it.” That is ethical overconfidence in action, and it is part of the reason that Enron no longer exists.”