Saturday, April 21, 2007

Decisions, Delusions & Debacles

Overconfident Narcissists

One doesn’t have to look far to find parallels in the corporate world. Overconfident CEOs provide prime examples of high-risk judgment errors that have caused huge financial losses. “From what we know of them, people at Enron thought they could control the world,” Goodie said.

Such blatant lapses in judgment and their associated undue risk taking have led him to team up with fellow UGA psychology professor W. Keith Campbell and UGA doctoral student Joshua Foster to study decision making among people with high levels of narcissism. Such people have overblown opinions of their intelligence, power and confidence and they demonstrate little sensitivity or caring toward others, said Campbell, who has studied narcissists’ behavior for more than a decade.

“They feel entitled; they feel special,” he said. “If you think you’re better than everybody else thinks you are, then you have to do lots of things to maintain that belief. You have to dismiss negative feedback. You end up adjusting your whole life to maintain the positive sense of self.”

Using Goodie’s experimental procedures involving trivia questions and estimated levels of confidence, the psychologists added a narcissism assessment without volunteers’ awareness. The findings presented no surprise: While no more accurate than others, narcissists were even more overconfident and more willing to bet, losing significantly more points. “Narcissists end up performing terribly because they don’t readjust their self-beliefs in the face of feedback,” said Campbell. “They take too many risks. They don’t pay attention to their failures.”

The researchers’ narcissism finding was published in the October 2004 issue of the Journal of Behavioral Decision Making.

Campbell readily connects such findings with real-world applications. “From an organizational or business perspective, make sure you’ve got checks and limits on the people in charge and don’t listen to their self-reports,” he said. “If they are narcissistic, not only are they going to be overconfident but they are also going to be charming, self-promoting, perhaps manipulative. If you don’t develop strategies to counteract narcissism, you can get into real trouble.”

Tyco’s former chief executive Dennis Kozlowski is a case in point, Campbell said. “When things started going bad, rather than readjust, Kozlowski denied it and did things that appear fraudulent. If you put money into a company, you want someone like Warren Buffett sitting there doing all the numbers.”


Judy Purdy