Dilbert does behavioural economics: Winners curse

winners curse

We are nearing the end of our Dilbert does behavioural economics series – do let us know how much you enjoyed this and found it helpful in understanding the field!

Sometimes having the inflated sense of abilities that accompanies overconfidence can lead to very bad outcomes. For instance, in corporate finance, the tendency of companies to overbid for projects and take on commitments they perhaps cannot manage is known as the winner’s curse. In the above strip, Dilbert’s boss has clearly fallen victim to this inclination.

Now, the good part about overconfidence is that is relatively easy to diagnose and treat at a symptom level. Typically, companies with this approach will take on many and large initiatives without considering internal project restraints such as timelines or resources or external reactions such as competitive countermoves or community outrage. By broadening the scope for example through scenario planning or testing the strategy through a deep dive for example in Playing 2 Win, you can add a healthy dose of realism and focus on the most value adding parts.

But remember you are still only treating the symptom – the underlying challenge is still there…

 

 

 

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