America The Underconfident

If there is a word in high demand today in marketing, politics, and the media, it is “uncertainty.”? Everywhere we turn, things somehow feel unpredictable.? We’re not sure what is going to happen next.

Many blame our feelings on the lingering effects of the pandemic.? COVID toppled confidence.? The outbreak was “unprecedented.”? And with that, our daily routines were upended, replaced with many new ways of life, both on and off the job.? Moreover, the pandemic further divided Americans.? Today, common ground is harder and harder to find.

Still others blame the war in Ukraine for our low confidence.? Wars – and in this case, one with significant implications to food and energy price inflation – compound our feelings of uncertainty and powerlessness.? Amid conflict, we feel more vulnerable.

Whatever the reasons, consumer sentiment surveys, like those from Gallup, the Conference Board, and the University of Michigan, all suggest that Americans lack confidence today.? By these organizations’ measures, our mood is as low now as it was at the bottom of the 2008 financial crisis and at the worst of the late-1970s era of stagflation.? Job offerings and recent wage gains may be high, but our mood isn’t, much to the consternation of economists, business leaders, and policymakers.

To believe the vernacular, our confidence comes in three sizes: none, some, and too much.? We lack confidence, have confidence, or have far too much confidence.? We are overconfident.? Under this three-tiered approach, most would agree that Americans lack confidence today.? Voters lack certainty and/or control in their lives. ?While that description may feel comfortable, I’d offer there is a fourth scenario we need to consider – that many Americans today are underconfident.

Underconfidence doesn’t get much airtime, but it should.? Just as we can be overconfident – and overestimate the certainty and control in our lives – we can feel the reverse.? We can easily overestimate our feelings of powerlessness and uncertainty.? We can feel more vulnerable than objective facts suggest we should.

During the very early days of the pandemic – in mid-March 2020 – you could see our underconfidence in real-time.? With viral caseloads still in the hundreds, we extrapolated millions of deaths ahead.? In the financial markets, expectations of an economic collapse soared, with some even calling for trading to be halted altogether.? As we know now, none of our worst-case scenarios played out.

This may seem like Monday morning quarterbacking, but our overestimation of risk happens routinely when our confidence is low – both in our individual lives and across society.? From first dates to awaiting medical diagnoses, underconfidence happens far more than we realize.? Feeling unsure, we are naturally braced for bad things to happen.?

What we miss in these moments is that our imagination of the future and our mood go hand in hand.? What we “see” ahead isn’t an objective forecast, but rather, it’s a subjective story that perfectly reflects how we feel.? Our crystal ball is more like a mood mirror.? When we feel especially vulnerable, we can’t imagine anything good happening.? And when we feel invincible, we only imagine the reverse.? (And I use the verb “imagine” deliberately.? Any time we consider the future, we must imagine it.? Whether we realize it or not, we are the science fiction writers of our own lives.)

Listen to the dire outlooks on offer these days and you can see our underconfidence at work.? In one moment, someone is suggesting civil war ahead, and in another, another Great Depression.? Today, across social media – and even major media – worst-case scenarios in economics, politics and even the social fabric of our society abound.? It isn’t a question of if things will get worse from here, but how and by how much.?? ???????????

While not suggesting such horrible things can’t and won’t happen, all of them are extremely low probability events.? They will only happen should societal confidence collapse first.? (And then, all would be consequences of our natural fight, flight, freeze, follow and f*ck-it responses to extreme vulnerability.)?

Beyond an ungrounded fixation on worst-case scenarios, there are other consequences to our current underconfidence.? It adversely impacts how we think.? At the core of confidence is cognitive ease – our brains must feel relaxed.? Underconfidence constrains that.? We use slower, more tiring System 2 thinking and are less capable of abstract thought.? Messages must be dumbed down for us to understand them.? We’re less smart.

Underconfidence also alters our preferences.? Like those inside a tent who hear a bear outside, we fall victim to a “Me-Here-Now” mindset.? Self-interest and close physical and temporal distance dominate what we want.? We focus solely on our own immediate problem.? Everything else is either pushed aside or ignored altogether.? The result is that we are far less social and cooperative with others, less curious and less forward-looking, too.? Strategic thinking and investing for the future are the last things on our mind.? Moreover, all adverse long-term consequences of our actions are ignored when they challenge the short-term and highly personal benefits we gain now.? We’ll deal with later, later.? Finally, “zero-sum thinking” takes hold.? When others gain, we believe it to be at our expense.

With this, we react rather than respond thoughtfully.? Our actions tend to be far more emotional and impulsive than they might be otherwise.? Caution and loss mitigation, rather than optimism and opportunity, drive what we do.? We play defense, while others play offense around us.

There are other more pernicious and underappreciated consequences to underconfidence.? Feeling vulnerable, we are prone to follow others who boldly assert they know the path forward.? We put our faith in leaders who are masters at “confidence theater” and the appearance of extreme certainty and control.? Not surprisingly, underconfidence is a feeding ground for predators of all kinds.? From conmen in the financial markets to cultish figures to authoritarian leaders of all political affiliations, we routinely fall victim to those who promise to eliminate our feelings of vulnerability.

To be clear, overcoming underconfidence is hard – especially in the face of a relentless, 24/7 news cycle and social media feeds that seem to only confirm our worst fears.? But it can be done.? From more deliberate scrutiny and skepticism of the extreme, low-likelihood forecasts we and others share to creating, accomplishing and celebrating short-term goals to volunteering in service to others and with others, there are steps we can take to boost our feelings of certainty and control. ?Moreover, the more we and others do so – the more consumer confidence rises broadly – the far less likely all of today’s doomsday scenarios are likely to be.

President Franklin D. Roosevelt was spot on, when in 1932 in his first inaugural address he said, “The only thing we have to fear is fear itself.”? Shared underconfidence – and the overestimation of uncertainty and powerlessness many now feel – is America’s greatest risk.? The more we can boost our own confidence and the confidence in others, the better off we will all be.

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Peter W. Atwater is an adjunct professor in economics at William & Mary and the author of “The Confidence Map: Charting a Path from Chaos to Clarity” from which this article adapted.