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Wall Street Lives, Dies by Overconfidence: Gladwell

By Harry Kimball, Newser Staff

Posted Jul 20, 2009 4:31 PM CDT

(Newser) – Confidence is key to the banking game, but an overabundance of it seems to have made the industry’s titans so delusional they blundered into the financial crisis, Malcolm Gladwell writes in the New Yorker. “The roots of Wall Street’s crisis were not structural or cognitive so much as they were psychological.” Yet the same overconfidence that brought down, say, Bear Stearns is what built it in the beginning.

“As novices, we don’t trust our judgment,” Gladwell writes. “Then we have some success, and begin to feel a little surer of ourselves. Finally, we get to the top of our game and succumb to the trap of thinking that there’s nothing we can’t master.” That’s not always a bad thing. “Winners know how to bluff. And who bluffs the best? The person who, instead of pretending to be stronger than he is, actually believes himself to be stronger than he is.”

[Images (3)]

[Quotes (2)]

A Wall Street street sign. (AP Photo)

Traders work the floor of the New York Stock Exchange. (AP Photo)

Former Bear Stearns Chairman James E. "Jimmy" Cayne. (AP Photo)

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Every side in the First World War was bluffing, with the resolve and skill that only the deluded are capable of, and the results, of course, were catastrophic. - Malcolm Gladwell

Sometimes the only way to get out of the problems caused by overconfidence is to be even more overconfident. - Malcolm Gladwell

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COMMENTS

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Showing 2 of 2 comments

kokuaguy

Jul 21, 2009 10:50 AM CDT

You are a true patriot, dear deebs.

brawne

Jul 21, 2009 5:36 AM CDT

No shitting. I'm a liberal capitalist. Meaning that I took advantage of my liberal education to play the stock market like the football game that is. I made a boatful last week and I don't know why, but, I happily pay my taxes to support those that don't have the benefit of my education. That others think that their money is a freebie that no one but themselves is entitled to, I'll never understand. The more taxes you pay just means the more money you made. The problem lies with thinking that it's a 100% yours. I know that it's only about 68% mine. But without this lovely system---I'd make nothing. Plus, God gave you deductions. This system isn't designed for the left or the right--it's designed for the people who get it or don't.

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Wall Street • Bear Stearns • Malcolm Gladwell • psychology • financial crisis • Jimmy Cayne • overconfidence

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