In the latest episode of Signals, host Nick Mazing sits down with Peter Atwater, Adjust Professor of Economics at William and Mary, and the author of “The Confidence Map.” Peter dives deep into the essence of confidence, distinguishing its two core elements: predictability and preparedness. He emphasizes that while many perceive these elements as intertwined, they stand separate, and are foundational to understanding confidence.
The conversation takes a turn towards the main theme of the book, the four quadrants, which maps situations based on levels of certainty and control. The two key quadrants discussed are the Stress Zone quadrant, characterized by low certainty and control, and the Launchpad quadrant, marked by high control amidst uncertainty. These quadrants shed light on human behaviors, from feelings of powerlessness in the Stress Quadrant to the entrepreneurial spirit in the Launchpad.
Atwater concludes by highlighting the power of narratives. He asserts that our perception of the future, especially when navigating uncertainty, is a direct reflection of our present confidence levels.
💡 Name: Peter Atwater
💡What he does: Book Author
💡Company: The Confidence Map
💡Where to find Peter: LinkedIn
The True Elements of Confidence
Peter Atwater breaks down the often-misunderstood concept of confidence into two distinct elements: predictability and preparedness. While many conflate the two, Atwater emphasizes their individual importance. Predictability revolves around our ability to foresee what’s coming, giving us a sense of security about the future. Preparedness, on the other hand, is about being adequately trained and ready for upcoming challenges. Together, these elements form the bedrock of genuine confidence, guiding our actions and decisions in various situations.
Navigating the Quadrants of Certainty and Control
Nick Mazing introduces a quadrant framework that categorizes situations based on their levels of certainty and control. Two pivotal quadrants discussed are the Stress Quadrant, where individuals feel powerless due to low certainty and control, and the Launchpad Quadrant, characterized by high control in the face of uncertainty. These quadrants not only illuminate human behaviors but also provide insights into decision-making processes, especially in challenging times.
The Power of Narratives in Shaping Perception
Peter underscores the significant role stories play in shaping our perceptions, especially when navigating uncertain terrains. He notes that our imagination of the future is often a mirror reflection of our current confidence level. This insight is crucial for leaders and decision-makers, as understanding the narratives can help in steering teams and organizations towards desired outcomes. By recognizing and harnessing the power of stories, one can effectively influence perceptions and drive positive change.
Discovering the Essence of Confidence
Peter Atwater dives into his journey of understanding the true nature of confidence. He realized that while many have a superficial understanding of what confidence looks like, its deeper essence remained elusive. Peter’s exploration led him to identify two distinct elements that form the foundation of confidence.
“Early on, I discovered that like many others, I knew what confidence looked like, but I didn’t know what it really was. And so I had to step back to figure out what it is that we need to feel confident.”
The Dual Elements: Predictability and Preparedness
Peter elaborates on the two core elements of confidence: predictability and preparedness. He emphasizes that these elements, while often perceived as intertwined, stand separate. Predictability is about foreseeing the future, while preparedness revolves around being ready for it.
“One was a sense of predictability that we think we know what’s coming, that we can imagine what’s ahead. And the other piece is a sense of preparedness that we are trained, we’ve rehearsed, we’ve practiced.”
The Personal Impact of Confidence Studies
Peter discusses the personal implications of his studies on confidence. He shares how his students found the concepts discussed in his class on confidence and decision-making personally beneficial, leading him to write a book that catered to a broader audience.
“So I wrote the book because I teach a class on confidence and decision making at William & Mary. I discovered my students were finding it useful on a personal level.”
The Behavioral Responses in the Stress Quadrant
Peter dives into the typical behavioral responses when individuals find themselves in the Stress Quadrant. He identifies five consistent reactions, emphasizing that while fight and flight are well-known, the other three responses are equally prevalent and crucial to understand.
“When we are in the Stress Center, there are five very consistent responses to when we are deep in the Stress Center. Fight and flight get all the attention. But there are three others.”
Peter Atwater: [00:00:00] early on, I discovered that like many others, I knew what confidence looked like, but I didn’t know what it really was. And so I had to step back to figure out what is it that we need to feel confident. And what I discovered was there were two distinct elements and very often we, we think of it as a buy one, get one free, but they’re really quite separate.
One was a sense of predictability that we think we know what’s coming, that we can imagine what’s ahead. And the other piece is a sense of Preparedness that we are, trained, we’ve rehearsed, we’ve practiced and that we know that what’s in what’s coming, we’re going to do. Okay. And so those are two separate elements.
But if you think about when we’re confident, it’s because we feel that we have a sense of certainty and what’s coming and we know that in what’s [00:01:00] coming, we’re going to be okay.
Nick Mazing: Hello and welcome. You’re listening to Signals by Alpha Sense and I’m your host, Nick Mazing. Our guest today is Peter Atwater, a former executive, now a consultant. adjunct professor of economics at the college of William and Mary in Virginia, which happens to be the second oldest educational institution in the United States and a book author.
His first book moods and markets came out in 2012 and his new book, the confidence map came out this year and we’ll have the links in the show notes. Peter and I, He had some back and forth when he was writing the book and we did play a very minor role in it. We’re looking at corporate transcript trends in the context of the overall theme of confidence.
And for people who follow economics, Peter is the person who came up with the term K shaped [00:02:00] recovery following the COVID period to describe what at the time, very divergent recovery trends. If you remember a lot of the COVID winners like Teladoc and Zoom and Peloton, et cetera, really did very well in that time period.
And other companies at the time, like cruise lines or, you know, concert companies were doing very poorly. So Peter, welcome. And can you tell us a little bit more about yourself?
Peter Atwater: Sure. Thanks, Nick, for having me. And, yeah, so I have had two careers. I’ve had a very traditional financial services career that I did on Wall Street and then was a banking executive at different banks around the country. And then, when I turned 45, my son said I was halfway to 90. And so I decided it was time to do something different.
And what that different was, was beginning to look at market sentiment and then look at confidence more broadly. I’m fascinated by the connections between how we feel, what we think, [00:03:00] how we think, and the stories we tell. So yes, you’re, you became incredibly helpful to me in trying to convey how our stories change based on how we feel.
Nick Mazing: So. My first question is why did you write the book? Because you’re not kind of the typical book author, you know, you’re not a professional writer. Your prior book came out 10 years ago. So it looks like after every crisis, you know, there is a book. Why did you write a book?
Peter Atwater: So I wrote the book because I teach a class on confidence and decision making at William Mary. discovered was my students were finding it useful on a personal level. That the concepts that we were talking about, looking at geopolitical decisions or economic decisions, the framework was as relevant to their own lives as it is to the lives of us as a group.
And so they encouraged me to write a book that Brought the way we were [00:04:00] talking in class to a broader audience. And one of the things that they and my publisher encouraged me to do was to make it actionable. This is not an academic book in the sense of something that goes through case, research.
paper after research paper. This is really practical. This is about how do we behave, every day and what are the consequences of that?
Nick Mazing: So now let’s talk about the book and, like all good consultants, we have a two by two matrix, which I think is very useful, of. Realizing where we’re at. And by we, I mean, individually, professionally as a company, if you’re thinking about from a company perspective and as a society, so on the horizontal axis, you have certainty high to low.
And I mean, it’s in quadrants, but it’s really is a continuum, which you make this pretty clear. And then on the vertical axis, you have control from low to high. And I think it’s a very elegant way to literally map situations and time peers. So what can [00:05:00] you tell us about the matrix?
Peter Atwater: Yeah. So early on, I discovered that like many others, I knew what confidence looked like, but I didn’t know what it really was. And so I had to step back to figure out what is it that we need to feel confident. And what I discovered was there were two distinct elements and very often we, we think of it as a buy one, get one free, but they’re really quite separate.
One was a sense of predictability that we think we know what’s coming, that we can imagine what’s ahead. And the other piece is a sense of Preparedness that we are, you know, we’ve trained, we’ve rehearsed, we’ve practiced and that we know that what’s in what’s coming, we’re going to do. Okay. And so those are two separate elements.
But if you think about when we’re confident, it’s because we feel that we have a sense of [00:06:00] certainty and what’s coming and we know that in what’s coming, we’re going to be okay.
Nick Mazing: I really like the quarter framework. It’s like, you know, imagine the longevity of BCGs quadrants, right? With the, cash cows and so on. I, I think it has that sort of, potential. So let’s talk about a couple of the quarters just to give people a taste of in the book. So let’s start with the lower left.
Quadrant, low certainty and low control, which is what you, I would say pretty accurately call the stress quadrant and the simplest example, and I think it goes back to what you just said about, it’s not just corporate or societal, but also personal examples is imagine you’re a, you know, a passenger on a rough flight, you’re in your seat, you have no control, maybe you’re very scared, right?
And that’s kind of the, type of stress, but with zero control. Right. And a very broad example, you know, if you think about. Society as a whole was March, 2020, right? We had no idea what’s going on at the time. Most people had zero idea what’s going on. And, you know, as a side note, you do have very good chronology of of March 25th, but [00:07:00] also the great financial crisis and the dot com boom, which I think is very useful to have those, really big shocks, to the system in, in everybody’s framework.
So what goes on in the stress quadrant? What should business leaders aim for when they’re in that period?
Peter Atwater: Yeah. So when we are in the Stress Center, And the reasons why really don’t matter, you know, to your point, whether it was the financial crisis, COVID, you know, you’ve broken a bone, you’ve been in a car accident, you know, the causes don’t matter, but the feelings are very consistent. We feel powerless. We feel very uncertain.
And so our response is to be more impatient. We’re not especially nice to ourselves or others. and I, uncovered that there are actually five very consistent responses to when we are deep in the Stress Center. Fight and flight get all the attention. But there are three others, and in fact, we’re more likely to exhibit those than we are [00:08:00] fight and flight, because we have to have skills or resources to fight and to flee.
The other three are to freeze, and that’s a very common response where you’re paralyzed by the experience, and you saw that with COVID. Another one is to follow, and this is actually our easiest response. if you think about when they’re We have a pipe burst and we start calling plumbers. we will follow anybody who is receptive to our problem and displays a, a willingness to help us.
And, and we’re, we’re really lousy. at discriminating and discerning who it is we should follow. And so we’re very prone to follow the wrong people. One of the things you see is that in the Stress Center, it’s an environment where there are lots of predators and, you know, it’s the, it’s the land of authoritarian leaders and cult figures.
And so we, we need to be more careful. last response, and I apologize [00:09:00] is, is the F. response is, and I, I like that term because it expresses the high emotion, the high impulsiveness. And what’s so interesting is we are not fleeing or fighting. It’s that we’re staying and being disruptive.
And maybe it’s because I’ve been involved in enough corporate mergers over my career, but after a merger, you see all five of these. Some people run, you know, they. Leave the company. Some are resist. Some just are paralyzed. And then there are those that just sabotage the organization. And so these are behaviors that if you know that you’re in the Stress Center, you can anticipate you’re going to act that way.
And others in the Stress Center are going to do the same thing.
Nick Mazing: yeah, that definitely it was, one could observe those during COVID, right? I mean, you can literally take each one of these and you can see prominent figures that were there. So, [00:10:00] the other quadrant that I wanted to. Touch on is the low certainty, but high control quadrant and the, you know, you call it the launchpad and this is very typical entrepreneurial zone.
so an entrepreneur certainly has a lot of control about what they do. Well, I’m saying a hundred percent control,but on the other hand, there is very little certainty, right? I mean, obviously there’s good advice, you know, don’t start a company unless we already have clients lined up and so on, but that’s, doesn’t always happen that way.
Also in the launchpad in that zone is where a lot of the growth happens. It’s how we get out of the stress zone. then there is interestingly enough, there is also a. Investing angle to that generally, when you have a big drop concert in the market, then the Ford returns after that are usually pretty good as we have seen, you know, in a number of, you know, after the dot com boom, after the 2008 crisis.
And as we saw during [00:11:00] COVID, the recoverywas pretty sharp after March, 2020. So how should our listeners recognize that quadrant? What should they do?
Peter Atwater: Yeah. So this is yeah. What I think of when I think of the hero’s journey, that you’re in the Stress Center and you are taking control. And we saw a lot of that with corporate leaders during COVID, they were slashing expenses and inventory and orders. They were doing everything they could to gain control amid uncertainty.
And one of the things, and this is a real personality issue. Entrepreneurs love that because when they think of uncertainty, they think of possibility. But most of us find the launch pad to be an uncomfortable environment. it’s like being halfway up a cliff as a rock climber. You’re not quite sure whether you’re going to make it to safety or whether you’re going to plunge to your, your fate.
And [00:12:00] so we need to realize that when we’re in the launch pad, stories are really important because we’re having to imagine the future. And one of the things we find is that. Our imagination of the future is completely a reflection of our confidence level, and it’s not accurate. And so if we can assess Objectively, the stories we’re telling ourselves, the story the media is telling us about what’s to come, we have a very good feel for where we are and you can resist that temptation to catastrophize when you’re in the launch pad and you’re worried that things are going to go poorly and you can resist The want to, to sort of fantasize about what might come.
I teach a class on financial economics, basically finance for economics majors. And [00:13:00] one of the things that we overlook with our financial decisions is they’re all made in the launchpad. We’re taking control, whether we’re investing, lending, borrowing, and then. We don’t know what’s going to happen, and the clearer we are, good and bad, about the outcome that we imagine, the more likely we are to be deluding ourselves.
And so I, I think that stories are such a critical part of that quadrant. And you all do a wonderful job of showing what the stories are that corporate executives are telling, in their, In their notes and executives are a wonderful mirror of mood more broadly.
Nick Mazing: Peter, thank you for joining us today.
Peter Atwater: Thanks so much, Nick.
Nick Mazing: So then we spoke with Peter Atwater, author of the confidence map. The book came out very recently and we’ll have the links in the show notes. The book is a great roadmap for decision making [00:14:00] in pretty much every situation. This was another episode of Signals by AlphaSense.
My name is Nick Mazing. Thank you for watching or listening.