Wall Street Lives, Dies by Overconfidence: Gladwell

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.” (More Wall Street stories.)