Confidence is arguably one of the most highly rated leadership virtues. But too much of it can be catastrophic, particularly when it comes to judgment and decision-making. Research has found that overconfident leaders can have a negative impact on organizational performance, leading to everything from introducing risky products that are unlikely to be successful to poor decisions about mergers and acquisitions. The foremost thought leader in decision-making, Daniel Kahneman, singles out overconfidence as the bias he would eliminate if he "had a magic wand."

Despite these findings, overconfident people attain higher social status and are viewed as more competent, allowing them to reap the reputational benefits. "Confidence makes individuals appear more competent in the eyes of others, even when that confidence is unjustified and unwarranted," says Cameron Anderson from the Haas School of Management at the University of California, Berkeley. Overconfidence undeniably wields a great deal of influence.

The question is, Why? According to psychologist and author, Maria Konnikova, "Human beings don't like to exist in a state of uncertainty and ambiguity." Confident people give off an air of assurance and certitude and are perceived as being competent which makes us an easy target to influence. In fact, emerging research has identified a particular area in the brain that responds to confidence, the ventromedial prefrontal cortex (vmPFC), an area involved in emotional regulation.

Types of Overconfidence

Overconfidence can come in many forms, the three most common being overestimation, overplacement, and overprecision. Overestimation is believing that you are better than you actually are. Overconfident people erroneously believe that they are more effective than they actually are. This is seen from the boardroom to the golf course, where CEOs overestimate their ability to generate returns, and golfers of all levels who believe they will be able to hit the ball farther than they actually do. Paradoxically, people tend to overestimate their performance on tasks that are hard and underestimate their performance on easy tasks, known as the hard-easy effect.

Taking it one step further, overplacement is the belief that you are better than others—more talented, smarter, less biased, more competent, even better drivers—even though you may not be. Overprecision is believing with complete certainty the accuracy of your judgments. This is the most ro­­­bust form of overconfidence with a wide reach: it is seen across cultures, professions, genders, ages and levels of expertise.

Beware of Overconfidence in Others

If we are emotionally, mentally and biologically attuned to respond to confidence, exercising caution is important when we encounter people with too much of it. To take caution, you can:

1) Determine whether the person has actual expertise and competence.

Our brains are hardwired to look for shortcuts, which sends us off looking for proxies that are indicative of expertise. Bryan Bonner, professor of management at the University of Utah, warns us to be aware of proxies of expertise, singling out confidence as a "messy proxy" for expertise. We mistakenly associate confident behavior with competence and ability. Examples include erect posture, eye contact, and speaking style, including intonation, speed and frequency.

Instead of relying on proxies, determine whether the person has actual expertise and competence. This can be determined by a number of factors (i.e. experience, training, education, and so on), with the most compelling being a strong record of consistent results. As the research shows, although even overconfident experts can be wrong, in most cases they have a higher chance of getting it right compared with those who lack expertise.

2) Look for intellectual humility.

People with intellectual humility are open to being wrong, consider other perspectives, and are willing to change their minds. "Leaders with intellectual humility are able to transcend the temptation to doggedly defend their own ideas," says Bradley Owens, professor of ethics at Brigham Young University, "They are willing to sacrifice some of their power and even reputation to ensure the right outcome." A lack of intellectual humility can lead to some disastrous consequences, as in the case of Sears. CEO Eddie Lambert thought he knew more about the retail industry than he actually did, ignored advice from seasoned executives, and despite the company's continual lackluster performance, stayed committed to his flawed thinking. Sears, once one of America's largest retailers, is now struggling to survive.

3) Be a skeptic.

Look for evidence, don't take things at face value, and be wary of reason that taps into your emotions. Wall Street Journal reporter John Carreyrou credits his East Coast skepticism and medical lens to exposing the dubious business practices of once celebrated Silicon Valley unicorn, Theranos. The founder, Elizabeth Holmes, achieved unprecedented success in large part because her supporters took her at her word; most lacked medical expertise, and were enthusiastic about the prospect of a female tech superstar in the same league as Jobs and Gates.

When you encounter someone with excess bravado, adopt a critical viewpoint, look for a track record of success, and check for intellectual humility. As we all know, confidence is a good thing but when there's too much of it, as the proverbial wisdom suggests, it's just too much.