When the Enron scandal broke in 2001, it shook Wall Street to its core and left thousands of people, who had lost billions of dollars in pensions and stocks, disillusioned and angry. People still wonder how the once-revered Wall Street giant, at the time the seventh-largest company in the U.S., crumbled almost overnight.
Overconfidence Is Contagious
Research shows that arrogance spreads socially.
November 17, 2020
Oliver Furrer/Getty Images
Summary.
Recent research shows that overconfidence within an organization can be contagious. That social contagion can shed new light on relatively recent events, such as the fall of Enron in 2001, which has many lessons to teach about the dangers of arrogance in the workplace. Companies that prize risky behavior create an environment where employees fuel one another’s feelings of invincibility. Six recent studies found that that people are more likely to become overconfident when others around them are overconfident. If people can “catch” overconfidence from their peers and leaders, the effect may multiply within a company and generate widespread norms. Companies that want to identify the cause of dysfunction and encourage more prudent decision making must understand the risk of having even a few overconfident employees.