Overconfidence and Government Failure – Decision Traps in Public Service

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Terry Newell
December 10, 2018

In 1991, construction began on a massive road and tunnel project aimed at improving traffic flow from Boston’s airport, through downtown, and over the Charles River. Originally estimated to take seven years and cost $2.8 billion, the project was not completed until 2007 and cost $14.8 billion. Dubbed “the Big Dig,” this joint federal-state-local effort is a poster-child for government overconfidence.

Overconfidence is common in many aspects of public service, from overly optimistic intelligence estimates and military campaigns, to tax cuts that fail to generate promised growth, to assumptions that we can “do more with less” that fail to deliver. Overconfidence is not confined, of course, to government. Stock and housing bubbles are driven by overconfidence. The most common reason for wrongful convictions is faulty witness identification of perpetrators, and an analysis of nearly 83,000 predictions made by 284 economic and political “experts” concluded that they did no better than crude extrapolation algorithms.

Why are we Overconfident?

In government, the most likely explanation is that overconfidence sells. Those who want to gain resources, power, and status are not likely to succeed if they seem less than self-assured. The optimist generates more support than the pessimist. Promising that you can do things faster, cheaper and better is likely to get you more support than expressing doubt.

Research suggests that those who are overconfident actually appear smarter to others.

Overconfidence also feels good to those who have it. That may be why 80 percent of drivers rate themselves in the top 30 percent of all drivers, a real-life example of the “Lake Wobegon” effect (the fictional town of Prairie Home Companion “where all the women are strong, all the men are good looking, and all the children are above average”).

Sometimes, ego can be a driver of overconfidence. That maybe why men give higher estimates of their IQs than women (despite the evidence that their IQs are no different, on average).

Can we Rein in Overconfidence?

Despite its allure, overconfidence often leads to excessive costs, long delays and government failure, with consequent loss of trust,power, prestige and resources. Confidence may be desirable, but overconfidence can be disastrous.

There are steps that public servants can take to limit overconfidence:

• Get what Nobel laureate economist Daniel Kahneman calls an “outside” view. The tendency in organizational decisionmaking is to look inside the agency for information, planning help, and budget estimates. The simple task of asking people outside the organization who have engaged in similar projects about their experience can add a large measure of reality to overly optimistic assumptions. Applied to the “Big Dig,”such a step might have found that major road projects are often behind schedule and over budget, and the reasons why.
• Use a “devil’s advocate” – if possible, from outside the situation. Asking someone inside the organization to challenge your thinking often puts that person in the threatening position of being the one who gets accused of “raining on the parade.” Another version of this is what the U.S. Army and intelligence community call a “red team,” a group set up explicitly to challenge the assumptions and conclusions that underlie an organization’s operational plans.
• Do an “predictions” test: if we are correct in our planning, what should be expect to see in 30 days, 90 days, six months, one year? Then, measure the results against expectations. As soon as you see a disconnect, probe the assumptions that led to the original estimates.
• Reward people on performance, not promises, and penalize dramatic overconfidence. You want people to be confident they can achieve; it’s overconfidence you need to restrain.
• Discourage risky behavior. Psychologists have coined the term “risk aversion” to explain why people take wildly unreasonable steps to avoid a loss. The prospect of losing resources,reputation, power or status drives people to make gambles – sometimes masked as overconfidence. Creating an organizational culture that avoids blaming and fosters forgiveness provides the psychological support people need to keep their behavior reasonable rather than risky.

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Author: Terry Newell is President of his training firm, Leadership for a Responsibility Society and is the former Dean of Faculty of the Federal Executive Institute. He can be reached at [email protected]. Additional essays on similar topics can be found on the “”The Ways We Think”portion of www.thinkanew.org.

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