Causes of hubris
The degree to which the circumstances seem precarious
In some circumstances, directors are especially inclined to choose a CEO who demonstrate hubris or undue confidence. Specifically, on some occasions, the position of an organisation is precarious. For example
- the financial performance of this organisation, such as return on assets or shareholder returns, may have declined,
- the level of sales in the industry may be low or variable over time,
- the previous CEO may have been dismissed.
According to Hill et al. (2023), during these precarious times, directors become more likely to hire a CEO who exhibits hubris. That is, during these periods,
- the directors want to believe the organisation is salvageable and thus feels uplifted when a CEO expresses unmitigated confidence rather than doubt,
- indeed, to overcome the challenges, directors may even prefer a CEO who is willing to embrace risks and pursue ambitious goals—tendencies that often coincide with hubris.
Hill et al. (2023) collected data that verify this premise. That is, the researchers
- collected videos of 125 CEOs in S&P 500 firms,
- invited three trained judges to evaluate the degree to which these CEOs exhibit three features of hubris: a grandiose sense of self, overestimates his or her abilities, and considers himself or herself unique and eternally qualified to manage the firm,
- collected data about whether the organisation was precarious at the time this person was recruited, such as decreases in return on assets, variable sales in the industry, and dismissal of the previous CEO.
After controlling several other characteristics, such as demographics about the previous and current CEO, the findings reveal that CEOs who exhibit hubris were more likely to be chosen during precarious times. That is, organisations were more likely to choose hubristic CEOs when return on assets or shareholder returns had recently declined, when sales in the industry had diminished or fluctuated significantly, and when the previous CEO had been dismissed.
Causes of overconfidence in the general population
Introduction
Some people, especially narcissistic individuals (Macenczak et al., 2016), are often unduly confident. For example, these individuals frequently overestimate how they will perform on a task. Therefore, they often squander funds, because their investments usually fail to achieve the benefits they anticipated (e.g., Camerer & Lovallo, 1999; Malmendier & Tate, 2005).
Researchers have ascribed this over-confidence to a range of characteristics or circumstances. These characteristics or circumstances can be subdivided into three main clusters:
- First, overconfidence could be ascribed to cognitive biases or heuristics—such as overlooking evidence that contradicts this confidence when people need to justify their decisions (Koriat et al., 1980).
- Second, overconfidence could emanate from the motivation of people to boost their self-worth or self-esteem (Alicke, 1985), called self-enhancement motives—a feeling that can enhance persistence on some tasks (see Pajares, 1996).
- Third, overconfidence could be ascribed to the yearning of some people to attract status, admiration, or rank Kennedy et al., 2013). Overconfident people are often perceived as high in status (e.g., Belmi et al., 2020). Thus, overconfidence may attract this status, fulfilling the needs of people who greatly value this attribute.
The pursuit of status
As research has shown, individuals who feel motivated to boost their status are indeed more likely to exhibit the hallmarks of overconfidence (for pioneering studies, see Anderson et al., 2012). To illustrate, one study, reported by Mayiwar et al. (2025), revolved around a task in which seven numbers, each comprising two digits, briefly appeared on a screen. The task of participants was to estimate the average of these seven numbers. The 550 participants were randomly assigned to one of two conditions:
- In one condition, participants were informed they would practice this task themselves and then compete against three other individuals—an instruction that was designed to prime the pursuit of status.
- In the second condition, participants were informed they would practice this task themselves and then cooperate with three other individuals on this activity—an instruction that was designed to inhibit the pursuit of status.
After completing the task themselves, individuals estimated the percentage of participants they believed they would outperform—a measure of overconfidence called over-placement. Finally, participants were prompted to indicate, on a five-point scale, the degree to which they were motivated to boost their status, regard, prestige, and respect from group members.
The results confirmed the hypothesis. When participants were informed they would compete with other individuals, their pursuit of status increased. This pursuit of status augmented the likelihood that participants overestimated the percentage of peers they would outperform (Mayiwar et al., 2025).