Confidence: looking beyond the surface

What exactly is the notion of confidence?

People generally tend to think of confidence as the ability to boldly charge forward with something, whether it be asking for something, declaring something, or acting out something. But what if that act itself is foolhardy? Confidently skydiving off of a building without the necessary precautions is a certain death sentence for example.

One could still argue that foolish confidence is still confidence. So perhaps we need to reset our notion that confidence is always a good thing. Perhaps risk-adjusted returns are a better measure of what we're seeking. If one confidently shouts that the CEO is a crook in a company-wide meeting due to one's own opinions, and the next day he coincidentally gets caught in a scandal, I would argue that's still a bad risk-adjusted return on one's actions (unless the person really had good justification for such a declaration). The risk of being wrong was just too consequential in that case (being fired).

Perhaps it's best to be confident one layer above the immediate actions that we associate with confidence. In other words, confidence in executing a well though-out approach, like a trading system. I recently spoke to a friend who mentioned that a key to winning in blackjack is to keep executing the same betting strategy even in light of some losing streaks. I guess most people would shriek away after seeing bad bets.

The lesson learned here is that one must converge upon a rational reason as to why something might work out - perhaps through a theoretical concept or through empirical past data - and then be confident in sticking to a plan. Sheer boldness in the face of uncertainty, i.e. first-level confidence, is nothing to be too impressed about without considering the underlying risks. There are exceptions of course, where a person may truly see something that others don't. But when it comes to performance, exceptional confidence calls for exceptional insight or skill, and short-term doubt is not a terrible thing in better understanding one's real edge.