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Alejandro Betancourt on Why Overconfidence Is a Big Mistake

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Confidence in your idea is essential for success in business, but overconfidence can be fatal.

Maintaining the right level of confidence is a constant challenge because it tends to change with each success and failure. This article discusses the benefits of confidence and risks of overconfidence according to entrepreneur and investor Alejandro Betancourt.

Background

Betancourt started his business career in Venezuela during the early 2000s. His first jobs included managerial roles at BGB Energy and commodities trader Guruceaga. He was also a commercial manager at a Latin American branch of ICC-OEOC, which provides technological solutions in offshore drilling. Betancourt later founded O’Hara Administration to manage international assets in a variety of industries, including his own investments. Since then, Betancourt has focused on investments which he often supports by taking leadership roles in those companies.

Philosophy

Betancourt’s philosophy on overconfidence is based on the idea that your confidence level tends to reflect your most recent outcome. With this viewpoint, winning too often can be risky because you may start to believe that your success will continue without interruption. Thinking that you can never be wrong prevents you from thinking about possible future outcomes analytically because you don’t expect anything to change.

However, no one wins all the time, as today’s markets tend to be highly volatile. As Betancourt puts it, “You lose the ability to predict correctly because you expect everything to continue happening the same way and that’s when you get overconfident and that’s a big mistake.” This type of overconfidence happens to all entrepreneurs, especially when they’re younger. However, it prevents them from developing multiple contingency plans, which is essential in business.

Balancing it Out

Failing to balance confidence with humility is one of the most common mistakes of company founders, according to Betancourt. These two qualities are closely related such that one of them necessarily decreases as the other increases, and entrepreneurs often find that they rely too much on one of them as they drive their business forward. Balancing confidence with humility is a constant process, as different situations require different traits.

Self-confidence is particularly important when starting a business because the idea is all you have in the beginning. You need to passionately believe that your solution to a problem is The Next Big Thing. However, overconfidence in a founder poses a high risk for a business as it matures. For one thing, it can cause others to believe you’re arrogant, which adversely affects the interpersonal relationships that are so important for growing a business. Misplaced confidence can also cloud your analysis of your vision, making it difficult to bring that idea to life. A healthy dose of humility is necessary for understanding your small place in the world, but too much of it holds your venture back.

Hawkers

Hawkers has sold millions of sunglasses at a high profit, but its origins are quite humble. Much of its success comes from the founders having a good idea, while also knowing they needed help to get their business off the ground. Four friends founded the company in Spain in 2013 and began selling Knockaround sunglasses they had bought with an initial investment of $300. Within four years, their annual sales had reached €60 million.

Despite this success, Hawkers’ growth was severely limited due to a lack of capital. The founders had previously started another business that failed for this reason, so they knew they needed funding to expand into markets outside of Spain. While they had confidence in their business model, they also had the humility to know that an experienced investor would be necessary to accomplish this goal.

They contacted Betancourt to manage Hawkers’ finances without impeding the company’s growth. One of his first acts was to organize a round of Series A funding that raised €50 million by October 2016. The following month, Hawkers’ founders offered Betancourt presidency of the company, which he accepted. Betancourt remains the president of Hawkers as of 2022.

Summary

Entrepreneurs need an abundance of confidence because they have no safety net. While they must embrace risk as a routine practice, it’s also essential for them to seek help from qualified experts. Betancourt is highly experienced in getting struggling companies on the right track with his financial support and personal expertise.

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