Superstitious Learning

Precious “experience” might just be making you dumber, not smarter. It’s a real problem called superstitious learning, and if you’re a manager, you need to pay attention.

Your Experience is Lying to You: The Superstition Trap in Business

Let’s be clear: experience matters. Nobody is arguing against learning from doing. It’s intuitive, right? The more you do something, the better you get at it. You build competence. You develop skills, you learn the ropes, you understand the causal links between what you do and what happens. This is the virtuous cycle we all aim for.

But… Experience does something else too. It builds confidence. And sometimes, maybe most of the time in the messy world of management, that confidence develops faster than actual competence.

Think about it. You lead a project, it finishes, and it’s declared a success (or maybe it wasn’t a total disaster, which counts as success in some places). You feel good. You think, “Hey, I know what I’m doing.” You attribute the positive outcome to your brilliant decisions. You build confidence in your capabilities.

The problem? In many complex tasks, especially the big, hairy ones like corporate acquisitions or managing a portfolio of strategic alliances, figuring out exactly why something succeeded or failed is damn near impossible. Was it your genius, or was it dumb luck? Was it the macro-environment, the timing, or something a key person did who has since left? The connection between your actions and the outcome is fundamentally ambiguous.

When performance outcomes are hard to measure or understand –called “outcome ambiguity” – managers tend to fall back on a simple metric: experience itself. You did it before, and it felt successful, so you must be competent. You develop an almost superstitious belief that repeating what you did last time will work again, even if you don’t truly understand why it worked (or didn’t). This is where the subjective feeling of learning becomes compelling, even when the actual cause-and-effect is completely mis-specified.

This is superstitious learning. And when it’s driven by your confidence outpacing your actual competence, it’s specifically called a confidence trap.

The Confidence Trap: Why Feeling Good Can Kill Your Deals

The confidence trap is a serious organizational problem. It means firms can repeat actions based on incorrect assumptions, leading to consistently sub-optimal behavior. Instead of a virtuous cycle of learning and improvement, you get a vicious cycle of confidently making the same mistakes.

Look at corporate acquisitions. It’s a complex task with significant causal and outcome ambiguity. Measuring the actual performance of an integrated acquired firm years down the line is notoriously difficult. Managers involved feel the pressure, they complete the deal, and they often attribute success to their efforts.

But guess what the data from US bank mergers shows? There’s a negative relationship between managers’ self-reported success in past acquisitions and the actual performance of the acquisition they just completed. Not only that, this negative relationship increases as managers accumulate more experience.

Let that sink in. The more experienced these managers were, and the more successful they felt they were in the past, the worse their current deal performed. Their confidence grew with experience, but their competence didn’t keep pace. They were stuck in a confidence trap. They learned the wrong lessons, or more accurately, they thought they learned lessons they didn’t actually understand.

This isn’t limited to M&A. It applies to managing strategic alliances too. Firms with lots of alliance experience can fall victim to overconfidence. They develop standard procedures, set up alliance departments, and create codified best practices – which sound smart, right? But these institutionalizing mechanisms, if relied upon excessively, can actually hinder learning and foster overconfidence, especially in very experienced firms. They encourage the repetition of possibly outdated or incorrect “lessons” without enough room for adaptation or experimentation based on the unique context of each new alliance.

How Not to Be an Idiot: Fighting the Superstition

So, how do you avoid being the confident, experienced manager who keeps driving deals into the ground? How do you make sure your experience builds genuine competence, not just hubris?

It’s not about avoiding experience; it’s about how you process it.

1. Get Deliberate About Learning: Don’t just passively accumulate experience (“learning-by-doing”). Invest in deliberate learning processes. This means actively trying to understand why things happened. Codify your knowledge, sure, but the process of codification itself forces you to articulate causal relationships and expose hidden assumptions. Systematically share knowledge, conduct post-mortems on deals (both successes and failures), and develop manuals or guidelines that are regularly updated and questioned. This deliberate reflection and articulation helps bridge the gap between perceived and actual competence. The research shows this significantly mitigates the negative effect of past success perceptions on future performance. In alliances, these are “integrating mechanisms” – like training sessions and formal knowledge exchange – that foster sharing and adaptation, in contrast to rigid “institutionalizing mechanisms”.

2. Seek Heterogeneity: Homogeneous experience breeds myopia and complacency. If you only ever do the same type of deal in the same industry, you reinforce your existing beliefs, even if they’re flawed. Diverse experiences, tackling different challenges in different contexts, force you to question your assumptions and break routine. They provide “contrasting evidence” that challenges your implicit theories of success. The data supports this: heterogeneous experience also helps temper the confidence trap.

3. Balance Act in Alliances: If you’re managing alliances, don’t just build a big, centralized department with lots of rules and procedures (institutionalizing mechanisms). You need a strong dose of integrating mechanisms too. Encourage managers to share new insights, experiment incrementally, and adapt practices to the specific context. Don’t let codified procedures become rigid dogma.

4. Measure What Matters & Foster Accountability: In complex, ambiguous tasks, rely on metrics and evaluations to understand actual performance, not just subjective feelings of success. Make managers accountable for outcomes, but also create a culture where learning from failures is tolerated and encouraged. Successful past experiences can create a self-reinforcing cycle that prevents the experimentation and change needed for real learning. Using evaluations and metrics helps disentangle cause and effect and makes you question your assumptions.

The Takeaway

Experience is valuable, but it’s not enough. Left unchecked, it can breed a dangerous overconfidence that blinds you to your actual lack of competence, leading you to repeat mistakes and consistently underperform in complex areas like M&A and alliances.

The key is intentionality. Be deliberate about how you capture and share knowledge. Seek out diverse challenges. Don’t let procedures become rigid prisons. Measure your actual results and be accountable. And maybe most importantly, stay humble. Just because you’ve done it before doesn’t mean you know what you’re doing now. Your subjective experience of success might just be a superstition.

Bibliography

Heimeriks, K. H. (2010). Confident or competent? How to avoid superstitious learning in alliance portfolios. Long Range Planning, 43(1), 57-84. https://doi.org/10.1016/j.lrp.2009.10.004

Zollo, M. (2004, May). Superstitious learning revisited: Outcome ambiguity and confidence traps in corporate acquisitions. In Nordic Workshop in International Business. https://flora.insead.edu/fichiersti_wp/inseadwp2005/2005-68.pdf