Carrier Management: Is Expertise a Liability? How Negative Feedback Impacts Decisions of CFOs, VCs, Other Experts
07 Jul 2022
Financial strategists, medical advisers and venture capitalists that are considered experts in their fields play a crucial role in major organizations but are more likely than novices to make overconfident predictions after being told they are wrong, according to a Rutgers study.
Originally found at Carrier Management
Published in the Academy of Management Journal, the study examined whether expertise could become a liability in adjusting to adverse outcomes.
Analyses of six studies—including data from chief financial officer predictions of stock market returns and calls by Major League Baseball umpires—show that negative feedback about mistakes can result in experts doubling down with over precise predictions and assessments.
“We typically think an expert has the skills and confidence to perform despite adverse conditions,” said Jerry Kim, co-author of the study and an assistant professor at Rutgers Business School. “But the reality is that confidence is built upon a foundation that can be threatened. Particularly in a time of constant feedback, every expert is subject to extreme scrutiny.”
In lab experiments, the researchers analyzed baseball fans and nonfans after getting negative feedback on how they thought a pitch to a batter would result (i.e., a fly ball, a bunt, etc.). In addition, expert investors and college students watched videos of business startup pitches and assigned probabilities on possible investment ranges.
Subjects primed to think they were experts—namely the baseball fans and investors—made overly precise judgments 16.3 percent of the time, while those who thought of themselves as novices made overly precise predictions 22.4 percent of the time. However, after receiving negative feedback, the expert group’s rate of overly precise predictions increased to 27.1 percent, whereas novices went down to 13.2 percent.
According to the study, negative feedback worsened the performance of the experts, while novices learned from the negative feedback.
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Read the original research in Academy of Management Journal.
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