The risk in trusting your gut isn't the bet you make. It's the risk you stop seeing.

You are looking at the umbrella policy renewal, or the buy-sell agreement your attorney flagged eighteen months ago and you never got back to, or the outside counsel review on the deal that is "basically done." You have made calls like this a hundred times and been right often enough that checking feels like a waste of an afternoon. So you sign, or you let it slide another quarter, and you go back to the thing that actually needs you today.

A new study in the Journal of Banking & Finance gives that instinct a number, and the number is not flattering.

Shirina Hsin En Lin and Dewan Rahman of the University of Queensland Business School, with Barry Oliver (also UQ) and Charlotta Sirén of the University of St. Gallen, analyzed 1,369 U.S. public companies across 64 industries from 2002 to 2023 — 37,000 firm-quarter observations in total. They did not ask executives whether they felt confident. They measured it the way finance research usually does: by watching whether a CEO holds onto profitable stock options longer than a rational, risk-averse executive would. Hang on to options you could safely cash in, the logic goes, and you are betting more of your own fortune on your own judgment than the numbers justify. That is the proxy. It is indirect, it is specific to public companies with option grants, and it is a correlational read of archival data, not an experiment — worth saying plainly, since the paper cannot tell us what would happen if any one CEO's confidence were dialed up or down.

What they found: firms run by these overconfident CEOs spent about 24 percent less on corporate lobbying per quarter than other firms, and were more likely to do no lobbying at all. Lobbying, in this study, is the stand-in for political and regulatory risk management — the unglamorous spending that protects a company against rule changes and policy shifts it cannot control. The overconfident CEOs did not just spend less on it across the board. They cut it hardest exactly when political risk was highest, including in the years after the 2008 financial crisis, when other firms were increasing their lobbying to manage the uncertainty.

"Overconfident leaders tend to place excessive faith in their own judgement and believe they have greater control over outcomes than they actually do." — Dr. Shirina Lin, in a University of Queensland statement on the research

None of this is about public companies with lobbying budgets, and the researchers never claim it is. But the mechanism they are describing does not require a lobbying line item to operate. It requires a leader whose track record has taught them that their read of a situation is the reliable variable, and everything else — the contract review, the insurance conversation, the second opinion on the buyer's financing — is overhead they can skip this time.

Here is why this lands differently for you than for anyone else in your building. An employee who skips a safeguard gets caught by a process, a manager, or a policy. You do not have that layer above you. If you decide the renewal can wait, there is no one who overrides that decision, because you are the one who would normally do the overriding. The confidence that got you to where you are was earned honestly — you made calls other people wouldn't make, and enough of them worked. That is exactly the record that makes the next skipped safeguard feel like discipline instead of exposure.

The part the research doesn't say, but that I'll say plainly: the study measured lobbying at large public firms, not insurance renewals or buy-sell agreements at private companies like yours. I am drawing that parallel, not the authors. What the paper does establish is the pattern underneath it — that confidence and risk-management spending move in opposite directions, and move furthest apart precisely when the risk is largest. Whether that shows up in a lobbying budget or in a shareholder agreement nobody has looked at since your partner's divorce, the direction is the same: the protective moves are the first thing a confident operator's judgment tells them they can skip.

One thing to do this week: pick the one risk-management document or policy in your business that you personally have not looked at in over a year — buy-sell agreement, key-person insurance, the employment agreement for whoever would run this if you couldn't — and put fifteen minutes on the calendar with the person who actually knows it, not to redo it, just to hear what has changed since you last paid attention. If nothing has, you have lost fifteen minutes. If something has, you just found it before it found you.

Co-author Dewan Rahman made the point that overconfidence is not purely a liability — it also drives the risk-taking and experimentation that builds companies in the first place. That trade-off is the reason this is worth knowing rather than fixing outright. You cannot subtract the confidence without subtracting some of what built the business. What you can do is get an outside read on where your own judgment runs ahead of the facts, before a skipped safeguard becomes the story of the business instead of a footnote in it. The Leadership Profile at the Wiring Map is built for exactly that read.