One idea, one quote, one question. 90 seconds.

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The Idea

Economists Ulrike Malmendier and Geoffrey Tate studied acquisition decisions by Forbes 500 CEOs over 15 years. They wanted to know what happens when very confident leaders make big bets. They measured overconfidence by whether CEOs held onto their own stock options past the point where diversification would have made sense, essentially looking for people who kept doubling down on their own judgment. The CEOs who did made significantly more acquisitions and got a worse market reaction when they announced them. The confidence that got them to the top of a company was the same confidence that led them to overpay for deals the market could see were bad.

Anthony Scaramucci described living through a version of this on the podcast this week. He founded SkyBridge Capital, built it into a firm managing billions, came up through Goldman Sachs, and then took a job as White House Communications Director that lasted 11 days. His wife warned him the job was a bad fit. He took it anyway. He said on the show that ego drove the decision and that he paid a heavy price for it.

What I took from the conversation is a question that I think is worth asking before any major decision. Are you being pulled toward something you want to build, or pushed toward something you want to prove? Scaramucci had already built SkyBridge. The White House wasn't about building anything. And his wife could see that clearly while he couldn't, because the person making the decision is usually the last one to recognize what's driving it.

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Quote

"The first principle is that you must not fool yourself, and you are the easiest person to fool." Richard Feynman, Caltech commencement, 1974

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Question

Think about the last big decision you were the most confident about. Were you chasing something you wanted to build, or something you wanted to prove?

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Listen

Anthony Scaramucci: 11 Days in the White House Then He Built a $3.5B Investment Firm. The build-vs-prove question is the thread that runs through the whole episode. He talks about the moments where his wife's read on a situation was more accurate than his own, why the signals that you're fooling yourself are always clearer to the people closest to you, and how he learned to tell the difference between ambition and ego after it was too expensive to confuse them.

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Read

Ego Is the Enemy by Ryan Holiday. Holiday's central argument is that ego is the voice that tells you you're ready when you're not, that you're the exception when you're not, and that you already know enough when you don't. The book is full of people who confused proving something with building something, and what it cost them.

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— Scott