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Guide to Decision-Making: Getting it more right than wrong by Helga Drummond

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1 Illusions of control: the confidence trap

“Think it possible that you may be mistaken.”

Quaker Advices and Queries

IN OCTOBER 2008, Wendelin Wiedeking, Porsche’s chief executive, announced an imminent takeover of VW. Hedge funds that had bet on VW’s share price falling were confounded. Tearful fund managers confronted huge losses. Yet within six months, Porsche was almost bankrupt. In a humiliating reversal, VW turned the tables on the predatory Porsche, which lost its independence – when it had seemed to come within an ace of success. Porsche was ruined by overconfidence. Yet why was Porsche so sure? What made it believe that it could dominate a company 82 times its size?

Calamity loves overconfidence. This chapter explores what causes overconfidence ...

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