Pop! Goes the Overconfidence Bubble

By Sallie Krawcheck

You remember overconfidence, right? Confidence’s flashy cousin?

Confidence is compelling. Research has shown that overconfidence is also compelling.

That means that even if someone has proven that their confidence in themselves is misplaced, we still find their confidence to be so enticing that we believe in them anyway.*

Last week was notable: (What felt like) a decade of news happened in just five days. It was also the week in which the overconfidence bubble seemed to burst. 

Let’s start with the tech wunderkinds:

There’s Meta’s loss of $700 billion in value, from its so-far-ill-advised investment in the metaverse, which really doesn’t even exist yet. Last week, Mark Zuckerberg acknowledged his overconfidence, apologized … and laid off 11,000 people (which is just 13% of its global workforce, if you can believe it).

There was also the sh*tshow over at Twitter, where new owner Elon Musk fired half his workforce (3,700 full-timers, and 4,400 of 5,500 contractors), then begged some to come back, then rolled out new revenue plans, then rolled back those new revenue plans — all with astonishing speed, and apparently without much regard for security or FTC mandates. (No such thing as “measure twice, cut once” over at Twitter.) Since Musk’s purchase means the company is no longer publicly traded, it’s unclear exactly how much value has been destroyed since he first bid for it, but he acknowledged the possibility of bankruptcy. So this may be the fastest torching of $44 billion in history. 

And of course, last week also featured the bankruptcy of FTX, to the tune of another $32 billion in value lost. Just two weeks ago, its CEO, Sam Bankman-Fried, seemed to be in a position of strength, talking about raising more outside capital for his crypto exchange to buy other, troubled crypto companies. And the FTX name was emblazoned on the Miami Heat arena. 

In the space of a few days, the company imploded; was almost bought, only to have the buyer back out the next day; and declared bankruptcy. It also came out that FTX allegedly lent its customers’ funds to another of Bankman-Fried’s companies to leverage that crypto and trade it. 

That’s not OK. It’s also not … you know, legal. (Nor is it even smart, and certainly not in this market.) 

No wonder the Miami Heat want their naming rights back. And overconfidence takes another hit.

Ellevest’s POV: At Ellevest, we build diversified investment portfolios for our clients. So the financial impact of this implosion of any individual stock or bond is substantially muted.

As for investing in cryptonope. We don’t. We might one day, but we don’t today. It’s not because we foresaw what was going to happen to the value of crypto. It’s because while the business case for crypto has been clear, the investment case has not been. So we just never got there. And in fact, while crypto has been “positioned” as an investment that would diversify stock market risk (being “independent” from traditional markets meant it was supposed to mute that volatility), it has instead demonstrated that it amplifies risk. Eeek. 

Also in the category of — if not overconfidence — then misplaced confidence: Last week’s red-wave-that-wasn’t.** Instead, election deniers were denied office, and all 50 states have now voted to send a woman to Washington. Several states elected to enshrine reproductive rights into their state constitutions, and Kentucky rejected an anti-abortion amendment to theirs. 

There are, of course, many different ways to cut the election results. We’ve heard a great deal about Gen Z turnout canceling out the over-65 vote. But also worth noting is that the turnout among women was underestimated. Again. 

You already know Ellevest’s POV on this one: Don’t mess with women’s rights. And don’t underestimate women. It’s a bad bet — in anyone’s forecast. 

Sallie Krawcheck Signature


See: Adam Neumann losing WeWork $40 billion in valuation — and getting seriously paid out anyway. See also: Adam Neumann getting another $350 million check for his new business idea … a PowerPoint about branded real estate.

Instead, some have referred to it as just some light spotting. (Hehehe. Sorry, I couldn’t help it.)

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Sallie Krawcheck

Sallie Krawcheck is the Founder & CEO of Ellevest.