Ambition or Overconfidence?
"We do this not because it is easy but because we thought it would be easy” - probably a founder
Founder life is focused on pursuing hard, ambitious and meaningful things. In order to make progress—progress that relies on challenging the status quo—confidence is needed. Confidence is a self-fulfilling prophecy, as Ford once said: "whether you think you can or you think you can't, you're right". Acting with confidence is a core asset to any founder to get people to believe in your vision, to bang through walls of rejection, to keep iterating past 1,000 failed prototypes.
Displaying natural confidence is definitely a good trait to have, but what about overconfidence? History is full of overconfident fools that caused their own demise. History is also full of people who achieved the impossible based on unwavering confidence in the face of catastrophic failures. It's hard to tell where the line between healthy confidence and overconfidence is.
Overconfidence in entrepreneurship: a feature or a bug?
Research shows that humans have a systematic bias that leads us to overestimate both the outcome and what's needed to get there (time, effort, money), even when we know this is a bias we have.¹ Creative types are even more susceptible to being overconfident. A Psychology Today study found that "creativity breeds overconfidence" - the most creative ideas aren't necessarily the best ones, but creative people often assume their ideas are superior without validation.²
That's not all. People systematically overestimate their performance on difficult tasks but underestimate it on easy tasks. This "hard-easy effect" is particularly relevant for builders and entrepreneurs who tackle genuinely difficult challenges - they're most overconfident precisely when the stakes are highest.³
The Dunning-Kruger effect is the tendency for individuals with low competence in a specific area to overestimate their abilities, while highly competent individuals may underestimate their relative expertise.⁴ We're most overconfident when we don't yet know what we don't know.
Bottom line: you're most likely to be overconfident when doing something hard, abstract, something never done before. In other words, founders are working against their psychology, and in many ways overconfidence can be destructive. In general, overconfidence is seen as a thinking flaw, a cause of poor decisions, something to avoid.
But wait! Overconfidence has value too
What if overconfidence serves a purpose in entrepreneurship and innovation? How might overconfidence be useful? A few psychology insights give us clues:
From a societal perspective, overconfidence likely persists because it drives innovation in the face of long odds. It helps overcome inertia and status quo bias, it inspires others to follow and take action, and it creates psychological resilience to overcome endless obstacles.
Research shows that about 80% of people exhibit optimism bias, and entrepreneurs score higher.⁵ Moderate optimism correlates with better health outcomes, stronger resilience, and more effective goal pursuit—suggesting optimal levels of "positive illusion" exist.⁶ Positive illusion sounds a lot like overconfidence to me.
While the Dunning-Kruger effect highlights the dangers of overconfidence from incompetence, research by Galasso and Simcoe (2011) found that overconfident CEOs are more likely to pursue innovation and secure patents.⁷ The key difference in the outcomes appears to be domain expertise coupled with overconfidence, versus pure ignorance.
People tend to be risk-seeking when facing potential losses but risk-averse with potential gains.⁸ Successful founders often reframe uncertain ventures as avoiding the "loss" of missing a major opportunity rather than gambling on a potential gain. For those founders, regrets are riskier than failure. They couldn't stand missing the boat on a once-in-a-lifetime opportunity, even if clearly a long shot.
The Founder's Paradox: Ambition or Overconfidence?
Successful founders tend to maintain what psychologists call "realistic optimism" - they acknowledge challenges while maintaining conviction in their ability to overcome them. This realistic optimism has distinctive traits:
Calibrated confidence: They're aware of the odds against them but still believe they can beat those odds through a tangibly superior plan, execution, insight, or timing
Epistemic humility: Despite big ambitions and conviction, they constantly test assumptions, seek disconfirming evidence, and adapt based on constant feedback
Conviction flexibility: They hold core hypotheses with conviction while remaining adaptable about implementation details
Healthy relationship with failure - They view setbacks as information gathering rather than personal indictments
Ways to avoid the downside of overconfidence
Separate identity from outcomes to reduce mental barriers to changing. You don't need to believe so hard in your opinions, your ideas, your beliefs. Keep in mind that identifying with those can make you more rigid in your thinking, and blind you to reality. Let them help you, not get in your way.
Implement regular assumption audits: what must be true for our plan to work, where might being wrong be most painful, how to avoid being caught by surprise when you are wrong?
Create feedback mechanisms that reward honesty over cheerleading.
Study both successes AND failures in your domain, they will teach you different lessons.
Those failure statistics don't apply to me
Each founder has to be a little crazy to believe that the data on high startup failure statistics won't actually apply to them. And here's the insight about ambition, overconfidence and finding success: any single startup has a low chance of success, but as a founder there are no limits on the number of tries you can make. If you learn from failed ones and keep trying, then those dismal odds really won't apply to you. Given the asymmetric payoffs for entrepreneurs who do succeed, you really only need to be right once.
Point is, expect to fail and miss a lot in the short term, as you progress on your way to long-term success. Feeling like you are failing when you're in fact on track to succeed is so counterintuitive that most people stop trying after their first startup failure. They accept that the statistics were correct. Overconfidence bias can push founders to keep taking big swings in the face of sheer odds.
Perhaps overconfidence can spell your demise, but the alternative would be worse. At a collective level, a high startup success rate could mean we're not trying hard enough to solve our big problems, not trying hard enough to innovate and find meaningful solutions. Overconfidence produces more shots on goal.
Advice to my young self
After building (and mostly failing) as a founder for 10+ years, I usually share this advice with younger entrepreneurs when they ask me about my journey.
The simple fact of life is that we're wrong way more than we're right.
Anything worth doing is going to be hard, and doing anything valuable requires you to do things the wrong way first, to learn to do them correctly eventually. Expecting failure at first makes the journey way less stressful than expecting to get it right first and always.
This is how every sphere of my life played out: work, health, love, friendships, parenting, playing music. I made catastrophic blunders and embarrassed myself many times. But now I can see how much I learned from what went wrong. Patiently putting those earned lessons into action is the very process of becoming successful.
Failure is not something that happens at one point in time. Failure is a door. To me failing feels like stepping out of a room, and into a new one. There is continuity with failure; the end of something always means the start of something else.
Have a nice weekend! 🌗
Gui
References
¹ Buehler, R., Griffin, D., & Ross, M. (1994). Exploring the "planning fallacy": Why people underestimate their task completion times. Journal of Personality and Social Psychology, 67(3), 366-381. https://doi.org/10.1037/0022-3514.67.3.366
² Boyd, D. (2015, September 21). Creativity Breeds Overconfidence. Psychology Today. https://www.psychologytoday.com/us/blog/inside-the-box/201509/creativity-breeds-overconfidence
³ Lichtenstein, S., & Fischhoff, B. (1977). Do those who know more also know more about how much they know? Organizational Behavior and Human Performance, 20(2), 159-183. Also see: Burson, K. A., Larrick, R. P., & Soll, J. B. (2006). Social comparison and confidence: When thinking you're better than average predicts overconfidence (and when it does not). Organizational Behavior and Human Decision Processes, 102(1), 76-94.
⁴ Kruger, J., & Dunning, D. (1999). Unskilled and unaware of it: How difficulties in recognizing one's own incompetence lead to inflated self-assessments. Journal of Personality and Social Psychology, 77(6), 1121-1134. https://doi.org/10.1037/0022-3514.77.6.1121
⁵ Sharot, T. (2011). The optimism bias. Current Biology, 21(23), R941–R945. https://doi.org/10.1016/j.cub.2011.10.030
⁶ Scheier, M. F., & Carver, C. S. (1985). Optimism, coping, and health: assessment and implications of generalized outcome expectancies. Health Psychology, 4, 219–247. Also see: Rasmussen, H. N., Scheier, M. F., & Greenhouse, J. B. (2009). Optimism and physical health: a meta-analytic review. Annals of Behavioral Medicine, 37, 239–256.
⁷ Galasso, A., & Simcoe, T. S. (2011). CEO overconfidence and innovation. Management Science, 57(8), 1469-1484. https://doi.org/10.1287/mnsc.1110.1374
⁸ Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-291. https://doi.org/10.2307/1914185