From IQ to No Clue

The Advantages

Of Cockiness

A little confidence is a good thing. But a lot of confidence may be even better -- particularly if you're a high-powered currency trader playing the international money markets.

Finance professor Carol Osler found that at least some of the wild and unexplained fluctuations in currency markets may simply be due to overconfident money traders. "Overconfidence can help you get ahead, but it can have serious ramifications, too," says Osler, who teaches at the International Business School at Brandeis University.

Osler and her research colleague, psychologist Thomas Oberlechner of the University of Vienna, interviewed 416 currency market traders. They asked these wheeler-dealers to rate how successful they were as traders on a seven-point scale ranging from "much less successful" than other traders to "much more successful." They also asked the traders' bosses to rate the employees' value to the firm, and then asked the traders to estimate what the exchange rate of five currencies would be in six months and in a year.

The first thing they learned is that -- surprise! -- most currency traders have outsize egos: Nearly three in four rated themselves as "better than average." Even most traders working at less prestigious institutions thought they were better than most, Osler and Oberlechner reported in a paper they have presented at two European universities and at Harvard.

The distinct whiff of hubris was confirmed when they compared the traders' self-evaluations with the supervisors' ratings. More than half of the traders gave themselves a higher rating than their supervisors did, while few underestimated their value.

The researchers found that this self-confidence had no impact on a company's bottom line. But it had a dramatic and positive impact on the careers of traders, increasing their chances of becoming a senior trader or chief dealer, when other factors such as age and trading success held constant.

"Overconfidence may enhance the personal qualities necessary for professional success and it may raise the opinions of people with power of promotion and survival," Osler and Oberlechner wrote, noting that psychologists have repeatedly demonstrated that confident people are perceived to be more competent and intelligent than people who lack self-confidence.

Put Liars on Hold, Believe in Your E-Mails

People are twice as likely to lie over the telephone than in e-mails, according to a study by Jeffrey Hancock of Cornell University.

Hancock, an assistant professor of communication, asked 30 students to keep communications diaries for a week, noting the number of conversations, instant messages, telephone calls or e-mail exchanges that lasted more than 10 minutes. He also asked the students to acknowledge how many lies they told while using each medium.

Nearly four in 10 (37 percent) of all telephone conversations involved some lying, while face-to-face conversations included lies 27 percent of the time. About 21 percent of the instant messages and 14 percent of the e-mailing included lies. Experienced e-mail users were more likely to lie more often, he reports in a paper to be presented in April at a conference on human-computer interaction in Vienna, Austria.

One reason people seem to lie less often in e-mails, Hancock said, is that they know there's a record of e-mail correspondence that could be retrieved and come back to haunt them.

morinr@washpost.com