Entrepreneurial Hubris and Overconfidence: The Dark Side of Positive Emotions
- Overindulging positive emotions, such as unwarranted optimism and hubris, can blind entrepreneurs to potential risks and challenges
- Corporate history includes many hubris-driven failures, such as Enron and Lehman Brothers, and in start-up ventures, such as Theranos and WeWork
- The Titan Submersible disaster, helmed by Stockton Rush, is a poignant reminder of the dangers of entrepreneurial hubris and overconfidence
Authors: Trang Chu and Tim Morris, University of Oxford’s Saïd Business School
Positive emotions play a vital role in fuelling entrepreneurs’ ambition, action and success. By harnessing the power of optimism, passion, and pride, entrepreneurs are motivated to innovate and disrupt, take risks, overcome setbacks, attract human and financial resources, and focus on their goals. These are crucial for dealing with the challenges and uncertainties characterising entrepreneurial ventures.
Yet, while positive emotions are beneficial, their excessive use, when left unchecked, can be perilous. Overindulging positive emotions, such as unwarranted optimism and hubris, can blind entrepreneurs to potential risks and challenges. For instance, Elizabeth Holmes’ enduring optimism in her revolutionary blood-testing technology at Theranos overshadowed critical feedback and warnings, leading to a catastrophic failure. Similarly, Adam Neumann’s epic vision for WeWork propelled the company to massive valuations, but his overconfidence and disregard for conventional practices eventually resulted in the company’s downfall.
Stockton Rush, the entrepreneur behind the ill-fated Titan submersible disaster, provides a striking example of how positive emotions can take a pathological turn. His charismatic leadership, sustained by an unwavering desire to revolutionise deep-sea exploration, exemplified the power of positive emotions driving entrepreneurial pursuits. However, as we delve deeper into his decision-making process, it becomes evident that these emotions paved the way for hubris and overconfidence.
Rush’s unrestrained pride and deep conviction in his abilities clouded his judgment and made him prone to various decision biases that had disastrous consequences. Unchecked hubris poses significant risks and emphasises the necessity to foster humility and harness doubt in leaders to facilitate unbiased decision-making. As one CEO eloquently put in The CEO Report (May 2015), “If you don’t doubt yourself in a constructive, positive way, you are borderline dangerous for your company.”
Hubris and Overconfidence
The complex interplay between hubris and overconfidence amplifies the effect each has on the other. Hubris is an extreme form of pride and arrogance often characterised by a sense of superior capabilities and an inflated self-image. A state of undue self-confidence can lead individuals to believe they are invincible, above others, and beyond the rules that govern normal behaviour. In Greek tragedy, hubris often led to the downfall of tragic heroes such as Icarus and Achilles. Overconfidence, however, is a cognitive bias where individuals overestimate their abilities, knowledge, or the accuracy of their judgments. It involves having too much faith in one’s predictions or decision-making, often leading to underestimating risks and making errors in judgment. While they are distinct concepts, they frequently coexist and contribute to a dangerous combination of traits in an individual or organisation. One of the perils of this combination is the disregard for rules and norms.
This was best conveyed during a YouTube interview in 2021 in which Rush reportedly expressed his aspiration to be remembered as an innovator. He cited General MacArthur’s famous quote, “You’re remembered for the rules you break,” to emphasise his approach. While acknowledging that he had “broken some rules” in manufacturing the Titan, he expressed confidence in the vessel’s safety, attributing it to sound engineering and logical decisions and pride in his unconventional use of carbon fibre and titanium, stating, “There’s a rule you don’t do that. Well, I did.”
In a July 2022, interview with a CBS correspondent, we see further evidence of this heroic stance when he was challenged on his use of carbon fibre instead of titanium for the hull. He was asked “Has anyone else said, “Look what Rush did. Maybe we should make ours out of carbon fibre?” To which he replied, No. I don’t think there are a lotta people chasing me on this one, unfortunately, but they will eventually.” Rush’s steadfast confidence in the submersible’s capabilities caused him to overlook its potential technical flaws and vulnerabilities, resulting in reckless operational choices, which later proved tragic for the project.
Biases in Decision-Making
Rush’s hubristic decision-making process also exhibited strong signs of confirmation bias and groupthink. The impact of confirmation bias was most pronounced in OceanGate’s safety standards, operations, and checklists, heavily influenced by aerospace practices rather than those relevant to ocean-related industries. This alignment could have stemmed from Rush’s irritation with the submersible industry regulations stifling his innovation or his personal experience and familiarity with safety and operational excellence in aerospace. Whatever the case may be, it is clear that he neglected crucial considerations specific to marine exploration that could have provided him with the perspective to consider the risks more carefully.
Rush’s recruitment strategy favoured “intelligent, motivated, younger” individuals in their 20s who aligned with the company’s vision of pioneering new endeavours, unlike the older “ex-military submariners” employed by competitors. The preference for hiring young engineers and student interns to design electrical systems for Titan may have unintentionally contributed to insufficient challenges and critical evaluation, fostering inadvertent groupthink. Surrounding himself with enthusiastic but relatively inexperienced individuals was the recipe for a team with limited perspective, wisdom, and context leading to homogenous perspectives and opinions – a classic scenario of groupthink.
The echo chamber effect, familiar in predominantly young and inexperienced teams, may have further hindered the critical evaluation of plans and strategies, as ideas went unchallenged and alternative viewpoints remained unexplored. Additionally, a power imbalance within the team is likely to have discouraged employees from confidently challenging Rush’s decisions and authority, given his seniority and track record. This lack of diversity in perspectives and the hesitation to challenge a seasoned leader like Rush could have significantly impeded the team’s ability to identify and address potential flaws and risks associated with the Titan project.
A more diverse group with senior experienced members could have provided the necessary confidence to challenge Rush and offered valuable insights, alternative viewpoints, and constructive criticism, ultimately aiding better decision-making and reducing the risk of critical errors. Outside his own business, Rush’s dismissal of expert advice and dissenting opinions meant valuable feedback from seasoned deep-sea engineers and experienced submariners was sidelined. For instance, an ex-employee is alleged to have raised concerns in a 2018 report about OceanGate’s refusal to conduct critical testing of the experimental design of the hull. Likewise, leaders in the submersible craft industry claimed they expressed their unanimous concerns about how OceanGate had not followed standard certification procedures and had urged Rush to test the vessel with an accredited outside group.
By examining how these biases played out in Rush’s decision-making, it becomes evident that they contributed to the project’s critical errors and disastrous outcomes. These examples highlight the importance of recognising how excessive positive emotions can lead to cognitive biases. Acknowledging this risk then means, leaders can put the requisite mechanisms in place to make more informed and responsible decisions.
Mechanisms for Responsible Leadership: The Imperative of Humility and Doubt
Humility and doubt play a crucial role in counteracting hubris and can be instrumental in preventing disastrous outcomes like the one described in the context of Rush. In 2015, a team from the University of Oxford’s Said Business School interviewed over 150 CEOs for The CEO Report to discuss how they intentionally incorporate humility and doubt into their decision process. Applying some of the insights of this research, we consider how humility and doubt could have influenced Rush to implement the requisite risk management more effectively.
- Humility encourages recognising limitations: Humble leaders readily acknowledge gaps in their knowledge and areas where their expertise may be lacking. By recognising their limits, they are more likely to seek external expertise and insights, such as independent technical reviews, expert oversight, and guidance. This allows them to gain and value different perspectives and identify potential shortcomings in their decision-making and risk-management processes. As an extension, it fosters a culture of open communication, constructive feedback, and the willingness to take on criticisms, helping leaders to identify and address risks early on and preventing them from becoming significant problems.
- Doubt promotes rigorous testing and validation: Leaders question assumptions and challenge the status quo when embracing doubt. Rigorous testing and validation become a priority to ensure that new ideas, products, or processes are thoroughly examined and verified before implementation. Doubt can prevent hasty decisions into risky endeavours by requiring adequate evidence of their effectiveness or safety.
- Risk assessment and mitigation through a humble lens: Humility and doubt encourage a more cautious approach to risk management that focuses on safety protocols and training. Organisations that value humility and doubt recognise the uncertainties involved and prioritise safety measures to protect individuals and assets from harm.
Lessons from History
The Titan Submersible disaster, helmed by Stockton Rush, is a poignant reminder of the dangers of entrepreneurial hubris and overconfidence. Rush had a steadfast belief in himself and the capabilities of the Titan submersible. In seeking to push the boundaries of what was possible in deep-water exploration with the Titan, Rush sought to leave a lasting legacy as a visionary entrepreneur and innovator.
However, Rush’s case is not an isolated incident; throughout corporate history and the world of entrepreneurship, we find numerous examples of similar hubris-driven failures, such as Enron and Lehman Brothers, and in start-up ventures, such as Theranos and WeWork. The cases of Holmes and Neumann, much like Rush’s Titan submersible disaster, underscore the importance of recognising and countering hubris in entrepreneurial ventures. Unchecked hubris and overconfidence can deprive leaders of crucial feedback, stifle diverse perspectives, and lead to inflated perceptions of success.
While entrepreneurs need the confidence to succeed, they should also foster a culture of humility and doubt to avoid hubris-driven failures, embracing constructive criticism and incorporating expert advice in their decision process. By harnessing doubt and remaining receptive to diverse viewpoints, leaders can make more informed decisions, ensuring a sustainable and successful path for their ventures. Humility and doubt are not signs of weakness in leadership but essential qualities that lead to more effective decision-making and better outcomes.
About the Authors – Tim Morris is an Emeritus Professor of Managements Studies and Trang Chu is an Associate Fellow at the University of Oxford’s Saïd Business School.