Bryan Caplan  

Why the Confident Don't Bet

Ron Paul and Austin Frakt Agre... Cynical about Confidence...
The world is full of confident people.  Despite their confidence, it's usually hard to make them bet on their beliefs - and even harder to make them bet at worse-than-even odds.  In one of my all-time-favorite posts by Robin Hanson, he indirectly suggests an intriguing explanation: "confident" has two distinct meanings.

The first is simply assigning a high probability to your beliefs.  The second, in contrast, is all about status.  Robin:

Consider some uses of the word "confident":

Tom is confident the bus will arrive soon.

This is often interpreted as Tom assigning a high probability to the bus arriving soon. But then what about:

The CDC is confident this diseases poses only a moderate risk.

...Now consider:

Sam took me into his confidence.

Perhaps this means Sam assigned a high probability that I would not betray him. But then what about:

Bill's manner is more confident these days.

Perhaps this means Bill assigns a high probability to his having a high ability.  But this last usage seems to me better interpreted as Bill acting higher status, and expecting his bid for higher status to be accepted by others. Bill does not expect to be challenged in this bid, and beaten down.

Robin concludes:

If you ever offer advice, to someone who asks you how confident you are in your advice, try to remember that this may at root not be a question about probabilities. It may instead be a question what can happen socially if your advisee follows your advice. How easily might others might challenge that advice, perhaps then lowering your advisee's status? To figure that out, you may need to look beyond probabilities and analysis robustness, and consider who might want to challenge this advice, what might make them want to launch such a challenge, and what resources they might bring to such a fight.

Is Robin right?  How confident are you in your judgment?  And just to be meta, what kind of confidence are you talking about?

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COMMENTS (9 to date)
Matt writes:

To answer all three; I'm not quite sure.

8 writes:

I always assess my confidence against the size of my position in the financial market. I was confident the euro was headed lower in the past couple of weeks, so I upped my bet massively. I was 100% confident, albeit without risking major capital destruction. Once I put the trade on, my confidence wavered....

When I'm not as confident, I take smaller positions or none at all.

If you ask me how confident I am about Europe going to hell in a hand basket, I'm very confident because the politicians and central bankers are exuding confidence and nothing else.

Justin writes:

Female hypergamy: "I want a man who is confident."

Tracy W writes:

How confident are you in your judgment? And just to be meta, what kind of confidence are you talking about?

If we are talking about the second form of confidence, isn't it all about how you act, not about your judgement? So your question is presuming we are talking about the first meaning.

And confidence in my judgement in what? On the whole, I'm pretty good at moving around the world without banging into things, though every now and then I turn out to be not as good at that as I thought.
I think it was Popper who gave a good response to this question about confidence in judgement. Say a mad scientist kidnapped a close friend of yours, and credibly threatened to kill them unless you told him the number of fingers on your left hand correctly. With so much resting on the stake, Poppper says, wouldn't you be likely to have a look at your left hand first, before making your statement? Even though it's something in which you are normally highly confident.

To take a bit more realistic example, I image that the people who do stunts like balancing a chair on a rope across the Grand Canyon with no safety net are more careful to check that the chair is sturdy beforehand, than when sitting down at a friend's perfectly normal table. Confidence is conditional on the downside risk you're taking.

david nh writes:

As someone who has spent most of my adult life advising and making recommendations to senior decision-makers, the last point of Hanson's that you quoted strikes me as perceptive. In many cases, what decision-makers are looking for is justifiability in the event that the chosen course is called into question after the fact for whatever reason.

Seth writes:

I often encounter business leaders who have 'great ideas' that they are 'sure will work' and would like 'the company' to try it out. When we suggest that they try it out within their own budget, they become a lot less confident in the idea.

Frank in midtown writes:

As a senior decision-maker, I lol'd at David's post. What kind of world would it be if I didn't have to have a reason for a decision. I agree many folks "decide" what they want to do and then wrap good sounding rationalizations around the already made decision. I enjoy rationalization skewering. It doesn't make me popular, but I'd rather have the results than the admiration of rationizing "decision" makers.

dullgeek writes:
As someone who has spent most of my adult life advising and making recommendations to senior decision-makers
Given the context that confidence might sometimes be about status, I thoroughly enjoyed this comment.
4everunknown writes:

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