Hubris refers to a personality trait that is close to an exorbitant self-confidence, pride, and arrogance. The term supposedly originates from the name of the Greek goddess Hybris, who symbolized violence, insolence, and, basically, the current meaning of the term “hubris” itself.
This harmful mindset might lead a person to wrong decisions and serious damage either to oneself and to others. Hubris is useless when it comes to investing as well. This trait makes an experienced trader undoubtedly sure in his or her choices and “blind” to the risks involved. These risks might not be paid off lately. And even if they get repaid, it might just be a coincidence. Sooner or later, this unreasonably risky strategy of investing will lead to serious losses and endanger the person’s investments. Therefore, hubris as well as an excessive pride are considered to be a flaw of character. The opposite trait to hubris is humility.
Self-confidence and Hubris: the same or different
Self-confidence is an important quality that might be of great assistance in any sphere of life, but when it transforms into something excessive, inflexible, and inconsiderable, it becomes more of a disadvantage than a benefit to a person.
Hubris and self-confidence are often confused with each other, however, there are some essential differences between them. In simple terms, every hubris person is self-confident, while not every self-confident person is affected by hubris. The latter demonstrates an excessive self-confidence which frequently crosses the line and might even offend people.
Another difference between aforementioned traits lies in the fact that hubris people are hugely confident, to the extent that they believe there is no chance of their failure. They are blind to the risk, while self-confident people always take it into account. Hubris also often makes people “deaf” to someone else’s opinion, advice, or help, because they consider themselves to be skilled enough to do the task on their own (even if they actually have no experience in this activity). These people don’t have doubts, and on the one hand, it might help them to make some bold decisions, but on the other hand, might make them incapable of accepting their mistakes.
Self-confident people have another quality – humility, that hubris people have a lack of.
Hubris is also slightly different from arrogance. The latter is based on comparison of oneself to others, while the first one doesn’t necessarily require this comparison.
Hubris people tend to underestimate others’ opinions, ideas, or skills, simply because they are sure that their opinions, ideas, and skills are much better, therefore – others’ are worse. That makes hubris people bad team players. Also, they’re prone to jump to conclusions without a preliminary analysis of the situation and planning their activity.
Despite the fact that a behavior guided by hubris and excessive self-confidence frequently is harmful and disadvantageous for a hubris person, it’s widespread among successful people. Partially it’s explained by their previous success and accumulated experience. Therefore, hubris is quite common among businessmen, executives, and other senior personnel.
But the higher the person’s position is, the more responsibility one has, and his or her hubris might influence the whole group of employees, clients, or both. For example, a chief executive officer (CEO) of a company A under the influence of hubris decides to extend the company’s product to another country without any analysis conducted. The company has already extended to another market recently, and this extension gained success. The chief is overconfident in the company’s success and ignores all the associated risks (e.g., a market niche might be overwhelmed; the company might be unready for the further extension; the product might be inappropriate to the chosen country).
Hubris in the sphere of investments
As we mentioned before, hubris can’t be described as an advantageous trait to a trader. Hubris isn’t the same as self-confidence, it might cause more harm than profit. Even if you’re educated enough to make some investment decisions and have enough experience of making successful trades, independent advice won’t be superfluous. The situation might be worse when a retail investor doesn’t have sufficient understanding of how the market works, but acts risky and excessively confident. Hubris works against him or her even more.
Some research have demonstrated that hubris traders tend to lose more than earn due to their arrogance and active trading. Typically, these investors believe that they have enough skills to manage any trade successfully. Interestingly, some research have also shown that overconfident traders usually have poorly diversified portfolio.
Examples of Hubris
Hubris takes place everywhere, therefore it’s not hard to find a relevant example. First, let’s take a look at literature. Hubris is vividly demonstrated in Mary Shelly’s “Frankenstein”, where one of the main characters – Victor – was blinded by his pride of creating the human being. Eventually, Victor’s hubris leads him, his creature, and others to a great despair and sufferings.
Now let’s take attention to examples within the sphere of investments. The infamous Enron Corp. attempted to beat the market by using a deceptive strategy. The company’s executives, probably, were led by hubris that ensure them in the ability to fool the market participants and gain a lot of profits. Ultimately, their unfair strategy was detected, and the company’s stock prices fell tremendously – from $90 to $0.25.
Another example in the sphere of investing is Nick Leeson’s story, when a professional and previously successful trader led Barings Bank to bankruptcy because of his hubris and unbalanced and overconfident investing strategy.
Ways to overcome Hubris
Hubris is frequently seen as a harmful personal trait, therefore it’ll be advantageous for a hubris person to overcome it. Although it’s a hard process, it’s possible. You might find relevant information in a specialized literature and self-help guides. You also might search for the help of a professional. In order to change this trait, you have to change your thinking patterns and develop other traits opposing to hubris. Thinking patterns might be changed by analyzing your behavior and the effect it has on people. Therefore, group working is highly recommended as an effective method of overcoming hubris due to the feedback from other participants. Hubris person has to stay self-conscious and self-aware, remembering that the current success doesn’t automatically lead to the future winnings, and also doesn’t make you better than others. Staying open to new experience and opinions develops you more than the opposite point of view.