🍀 How Luck Warps Your Confidence

New research shows how momentary bad luck turns you into a pessimist

Everyone knows that a coin has a 50–50 chance of landing heads or tails. That’s why we often agree to a coin flip when we can’t decide between two options: we understand that randomness is unpredictable and therefore fair. If I want to watch stand-up comedy but my wife wants to watch reality TV on Netflix, we can let the randomness of a coin decide.

Yet, for some reason, we constantly let chance outcomes like coin flips shape our self-belief and expectations in everyday life. A few lucky breaks can make us feel competent, bold, and motivated, while a few unlucky outcomes can make us cautious, pessimistic, and risk-averse.

A new large-scale study puts this tendency under a microscope and asks a simple question: what happens to people’s beliefs, confidence, and risk-taking when they experience success or failure in a task that is very obviously random?

🧪 What did the researchers do?

In a recent study that included five experiments and over 12,000 participants, researchers studied how people respond to success vs failure when predicting the outcomes of random events like coin tosses.

Participants predicted the outcomes of five or ten coin flips, either using a real physical coin or a virtual coin. Because the coin was always fair, people performed at 50% accuracy on average. However, since there were only 5-10 coin flips for each person, some people got lucky guessing correctly more than 50% of the time while others got unlucky and performed badly.

Crucially, participants were not deceived. They were told the coin was fair and many even flipped the coin themselves.

After their initial predictions, participants were asked:

• How good they thought they were at predicting future coin tosses

• How many correct predictions they expected to make out of 20 future tosses

• How willing they were to bet money to play again

• How much they attributed their performance to skill vs luck

This allowed the researchers to measure how people’s beliefs and risk-taking behaviors were impacted by their competence in a task that had nothing to do with their actual competence.

🔍 What did the research find?

There was a consistent pattern across all five experiments:

1. The more successful people were with guessing the coin tosses, the more optimistic and confident they became.

2. The more unsuccessful people were with guessing the coin tosses, the more pessimistic and cautious they became.

This happened even though participants knew the outcomes were purely random and that each coin flip was completely independent of every other coin flip. In fact, even participants who scored highly on general probability knowledge and mathematical awareness couldn’t resist having their confidence shaped by their coin flip performance.

If we were thinking rationally, we would ignore past random outcomes when deciding how the coin will flip next and how confident we should be about guessing it correctly. Instead, we adjust our beliefs about how we’ll do in the future to match our personal past experience, even when that experience is meaningless noise.

Interestingly, failure tended to have a stronger psychological impact than success. People who did poorly became more pessimistic than high performers became optimistic, suggesting that negative feedback shapes beliefs more than positive feedback. When we’re running on a streak of bad luck, we need to be especially careful about how it’s impacting our beliefs, our decision-making, and even our self-esteem.

Many of the events in our lives are driven at least partly by chance: promotions, investment outcomes, exam results, health scares, and social feedback all contain some element of luck (or bad luck).

This study shows that we’re not good at excluding those elements of chance and randomness when it comes to judging ourselves and deciding what to do next. When we constantly update our self-beliefs based on irrelevant noise, we’re vulnerable to overconfidence after good luck and feelings of insecurity or self-doubt after bad luck.

⭐️ Takeaway tips

#1. Treat short-term outcomes as weak evidence

• In science, there’s the important concept of “sample size”. You shouldn’t draw conclusions based on a very limited set of events, since you can be misled by one or two strange events. When you start a new project, a few wins or losses don’t tell you much about your competence. Be careful not to let recent randomness become a story about who you are or what you’re capable of.

#2. Separate decision quality from outcome quality

• You can make a great decision and get a bad outcome, or make a terrible decision and get lucky. Try to evaluate choices based on the reasoning behind the original decision, not just how things turned out. For example, when watching their favorite sports teams, it’s common for people to shout “WHAT A TERRIBLE COACHING DECISION!!!” when a specific strategy misfires. When the same strategy does work out, you’ll hear “WHAT A GENIUS COACHING DECISION!!!”, even though the same decision was made in the two scenarios. It’s important to disentangle what we do from what happens, and judge each of them in their own right.

#3. Be especially gentle with yourself after unlucky streaks

• This research suggests that negative chance outcomes distort confidence more than positive ones inflate it. So if you feel suddenly pessimistic after a run of bad luck, it may be your brain misinterpreting what’s going on. Feedback and learning from experience are essential in good decision-making, but not everything is valuable feedback. Knowing the difference between random luck and useful signals helps us to stay the course when we have a good idea rather than giving up too early.

“It is a truth very certain that, when it is not in our power to determine what is true, we ought to follow what is most probable.”

~ René Descartes

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