The Power of Unfounded Confidence: Real-world Examples and Data on How the 'Self-Important' Changed the World

Few people would have a positive impression upon hearing the four-character idiom 'Yaro Jidai'.

It is a term used to describe a small-minded person who acts arrogantly without knowing their own limitations.

Even in a business setting, if someone is called 'Yaro Jidai,' it is a clear criticism.

But is that really the case?

Looking back at history, there is a fact that people who were called 'ignorant of their own limitations' have changed the world.

When Steve Jobs announced the iPhone, industry experts mocked him, saying, 'There is no way it will succeed in the mobile phone market.'

When Elon Musk started his private space business, former NASA executives dismissed it as a 'dream story for amateurs.'

In this blog, I will re-examine the concept of Yaro Jidai.

Certainly, being ignorant of the world might be 'painful'.

However, unfounded confidence, grandiosity, and challenges that ignore one's own limitations are precisely what have created innovation, propelled careers, and moved the times forward.

Based on data from psychology, management studies, and neuroscience, I will thoroughly elucidate the value of 'strategic Yaro Jidai'.

What is important is the balance between humility and confidence.

Excessive humility leads to lost opportunities, while excessive confidence invites ruin.

However, modern Japanese society is clearly leaning too far toward humility.

To regain that balance, let's first look at the origins of Yaro Jidai.

The Origin of Yaro Jidai: The Frontier King Who Surprised the Han Envoy

The source of the term Yaro Jidai is the 'Biographies of the Southwestern Barbarians' in the Chinese historical record, the 'Records of the Grand Historian' (Shiji).

It records events from the 2nd century BC, during the era of Emperor Wu of the Western Han Dynasty.

At that time, there was a small country called the 'Kingdom of Yelang' in the southwestern part of China (around present-day Guizhou Province).

It is said that the king of this country asked Tang Meng, an envoy of the Han dynasty, "Which is larger, Han or Yelang?"

The envoy was dumbfounded.

This was because the territory of the Han Empire was approximately 6 million square kilometers, while the Yelang Kingdom was likely only a few thousand square kilometers.

In other words, there was a difference of more than 1,000 times.

However, there was a reason for the King of Yelang's ignorance.

The Yelang Kingdom was surrounded by rugged mountainous terrain and had almost no interaction with the outside world.

For the king, his own country was the "world," and the existence of the Han Empire was merely an abstract concept.

From this story, "assuming one's own narrow world is the entire world and acting arrogantly" came to be called 'Yelang Zida' (Yelang's arrogance).

What is interesting is the continuation of this story.

Through his dialogue with the Han envoy, the King of Yelang learned about the outside world and eventually submitted to the Han.

And the Yelang Kingdom became an important base for the Western Han in the southwestern region.

In other words, the King of Yelang's "ignorant question" led to the development of his country as a result.

If the King of Yelang had been servile, thinking "I am merely the king of a small country," and had avoided dialogue with the envoy, the Yelang Kingdom would not have left its name in history and would likely have been destroyed by another country.

The King of Yelang's "unfounded confidence" ironically made the survival of his country possible.

This paradox holds true even today.

Without confidence, opportunities do not come.

Even if that confidence has no basis, by acting with dignity, doors will open.

Now, let's verify this phenomenon with modern data.

The Price of Excessive Humility: Quantifying the Opportunities Lost by the Japanese

Japan has an extremely humble culture by global standards.

However, that humility may be causing economic losses.

First, let's look at the cost of humility in salary negotiations.

According to the OECD's "Wage Dynamics" (2023), the percentage of Japanese workers who negotiate their salaries is approximately 12%, which is significantly lower than the OECD average of about 38%.

The figure is about 51% for the United States and about 43% for Germany.

Furthermore, among those who did negotiate their salaries, the percentage who actually secured a raise was approximately 58% in Japan, 78% in the United States, and 71% in Germany.

In other words, Japanese people avoid negotiating in the first place, and even when they do, their success rate is low.

This difference has a major impact on lifetime earnings.

According to a 2022 survey by the recruitment firm Robert Half, there is an average difference of approximately 130 million yen in lifetime earnings between those who actively negotiate their salaries throughout their careers and those who do not.

Assuming a working life from age 30 to 60, this amounts to a difference of about 4.3 million yen per year.

Why do Japanese people avoid negotiation?

According to a 2021 study by Professor Jun Nakahara of Rikkyo University, approximately 68% of Japanese workers responded that they "feel that salary negotiation is a brazen act."

This percentage is overwhelmingly higher compared to about 23% in the United States and about 31% in Germany.

In short, a culture that views humility as a virtue is generating economic losses.

Next, let's look at the impact of humility on entrepreneurship.

According to the 2023 Global Entrepreneurship Monitor (GEM) report, Japan's entrepreneurial activity rate (the percentage of entrepreneurs in the population aged 18 to 64) is approximately 5.4%, ranking 47th out of 50 countries surveyed.

The United States is at about 17.4%, China at about 14.8%, and India at about 14.2%.

Even more interesting is the relationship between entrepreneurial intent and self-assessment.

According to GEM data, approximately 11.3% of Japanese people answered that they "have the skills and knowledge necessary to start a business," which is also at the lowest level.

In the United States, about 55.7%, and in China, about 42.1% answered that they "can do it."

But what about their actual skill levels?

In the World Economic Forum's 'Human Capital Index,' Japan ranks 24th out of 130 countries, which is by no means low.

In other words, while Japanese people are actually capable, their self-assessment is abnormally low.

This underestimation excludes the option of entrepreneurship from the very beginning.

According to a 2020 study by Professor Isao Yamamoto of Keio University, about 73% of Japanese university students think that 'entrepreneurship is impossible for me,' with the top reason being 'I lack talent' (about 58%), followed by 'I am afraid of failure' (about 47%).

However, when successful entrepreneurs were asked, 'Did you have sufficient skills before starting your business?', about 67% answered 'No.'

In short, the majority of successful people started their businesses with 'unfounded confidence' and learned as they went.

The Neuroscience of Confidence: The brain actually becomes 'able' by thinking it 'can'

The mechanism by which unfounded confidence actually produces results can be explained by neuroscience.

This is a concept known as 'Self-Efficacy.'

According to this theory, proposed by psychologist Albert Bandura in 1977, the belief that 'I can do it' improves actual performance.

In a series of experiments by Bandura, even among people with the same ability, those with higher self-efficacy worked on difficult tasks about 2.3 times longer and had a success rate about 47% higher.

Why does such a difference arise?

According to neuroscience research, when self-efficacy is high, activity in the prefrontal cortex (responsible for decision-making and executive function) and the striatum (which processes reward and motivation) increases.

Conversely, when self-efficacy is low, the amygdala (which processes fear and anxiety) overreacts, and behavior is inhibited.

In a 2013 study by Professor Alia Crum of Stanford University, simply telling hotel housekeepers that 'your work is excellent exercise' led to actual improvements in their weight, blood pressure, and body fat percentage.

Although the objective labor content did not change, the perception that 'I am exercising' triggered physiological changes.

This phenomenon is a type of 'placebo effect,' but the important point is that the placebo is not just a 'belief,' but is accompanied by actual physiological and neurological changes.

Studies using fMRI (functional magnetic resonance imaging) have confirmed that pain reduction via placebo actually decreases activity in the brain's pain-processing regions.

Similarly, the belief that 'I can do it' is not just a mindset, but changes the way the brain itself functions. A 2018 Harvard University study found that people with high self-efficacy show activation of the prefrontal cortex when facing difficulties, which strengthens problem-solving thought patterns.

On the other hand, people with low self-efficacy show a reaction in the amygdala, which strengthens avoidance-based thought patterns.

In short, "unfounded confidence" is actually a "mechanism for creating foundations."

If you have confidence, you take on challenges; if you take on challenges, you accumulate experience; and experience creates genuine confidence.

This virtuous cycle turns the "audacious" into "pioneers."

A Reinterpretation of the Dunning-Kruger Effect: Ignorance as a Source of Courage

In my previous blog, "Yamasuzume Tone," I introduced the Dunning-Kruger effect as a danger of intellectual stagnation.

It is the phenomenon where those with lower ability have higher self-evaluations, while those with higher ability become more humble.

At first glance, this appears to demonstrate the dangers of ignorance.

However, from another perspective, this effect also shows that "ignorance can be a source of action."

If beginners were fully aware of their own ignorance, they would likely never be able to start anything.

A 2019 study from the University of Washington measured the Dunning-Kruger effect among entrepreneurs.

It found that in the early stages of entrepreneurship, approximately 78% of entrepreneurs "overestimated their abilities," and the higher the degree of that overestimation, the higher the business survival rate after three years.

Specifically, the business survival rate for entrepreneurs whose self-evaluation was about 30% higher than reality was about 68%, while it was about 52% for those with a 10% overestimation, and about 41% for those with accurate self-evaluations.

What is the reason for this surprising result?

According to the researchers, entrepreneurs who overestimate themselves underestimate the "possibility of failure," leading them to adopt bold strategies, invest aggressively, and not give up when facing difficulties.

On the other hand, entrepreneurs with accurate self-evaluations are so aware of the risks that they become overly cautious and miss opportunities.

Silicon Valley investor Peter Thiel states in his book "Zero to One":

"Successful entrepreneurs see what others do not. It is not insight, but rather something closer to delusion.

But it is that very delusion that makes the impossible possible."

In fact, many of the greatest innovations in the history of technology were projects that "looked reckless to experts."

When the Apollo program was announced in 1961, approximately 65% of the technology required for a moon landing did not yet exist.

Nevertheless, President Kennedy declared that the United States would "land a man on the moon within a decade," and they actually succeeded in 1969.

Elon Musk of SpaceX is the same.

When he founded the company in 2002, rocket launches by private companies were considered technically impossible.

Rocket science experts harshly criticized it as the "shallow thinking of an amateur."

However, Musk did not listen, and as of 2023, SpaceX has succeeded in approximately 60 launches per year, accounting for about 60% of the global commercial rocket market.

A 2021 study by the Massachusetts Institute of Technology, "The Power of Naive Ambition," quantifies the value of "ignorant ambition."

Researchers tracked 1,247 startups in the technology industry and examined the relationship between the founders' years of industry experience and their success rates.

The results were surprising.

The success rate (IPO or major acquisition) for founders with 0 to 2 years of industry experience was about 8.7%, 3 to 5 years was about 11.2%, 6 to 10 years was about 9.8%, and 11 years or more was about 6.3%.

In other words, moderate experience (3 to 5 years) is the highest, and too much experience is actually a negative.

According to the researchers' interpretation, if one has too much industry experience, they become bound by "industry common sense" and cannot create disruptive innovation.

On the other hand, moderate ignorance enables ideas that are not bound by preconceived notions.

It is no coincidence that Steve Jobs was an amateur in the computer industry and Jeff Bezos was an amateur in the book industry.

Strategic Use of Arrogance: When and How Far Should You Stretch Your Ambitions?

So far, we have looked at the value of unfounded confidence.

However, do not misunderstand.

Unlimited arrogance leads to ruin.

The important thing is to use arrogance "strategically."

In the startup world, there is a saying: "Fake it till you make it."

This is not an endorsement of fraud, but an explanation of the importance of speaking about your vision on a grand scale.

Paul Graham, founder of Y Combinator, states that '80% of successful startups were ideas that were called impossible during their first pitch.'

When Airbnb first pitched to investors, almost everyone rejected them, saying, 'It's crazy to stay in someone else's home.'

However, the founders remained convinced, and the company's current valuation has reached approximately 8 trillion yen.

In Japanese culture, 'spreading a large furoshiki' (making grand claims) is viewed negatively, but by global standards, it is valued as being 'visionary.'

When Masayoshi Son of SoftBank declared in 1981, 'We won't count by the block like a tofu shop, we will earn in the trillions,' he only had two employees.

However, that vision attracted talented people and investors.

After spreading a grand vision, what is important is to have a connection with reality.

Former Intel CEO Andy Grove famously said, 'Only the Paranoid Survive.'

It is the balance of a bold vision and careful execution.

Google's concept of '10x thinking' is a useful reference.

This is the philosophy of 'aiming for 10x improvement rather than 10% improvement,' but at the same time, Google operates a strict goal management system called 'OKR (Objectives and Key Results).'

It is a combination of big goals and small steps.

The failure of the King of Yelang was not that he didn't know the outside world, but that he didn't try to know it.

However, in the latter part of the story, the king interacted with an envoy from the Han dynasty and learned the reality. This is a feedback loop.

The 'Lean Startup' method from Silicon Valley systematizes this principle.

This method, proposed by Eric Ries, emphasizes rotating the 'Build-Measure-Learn' cycle at high speed.

Formulate a hypothesis (spread a grand vision), release a minimum viable product to the market, collect data, and revise the hypothesis.

According to statistics, companies that adopt the Lean Startup methodology have a time-to-market approximately 33% shorter, initial development costs about 58% lower, and a success rate about 2.6 times higher compared to traditional development methods.

The most advanced strategy is to use humility and confidence selectively depending on the situation.

The "Level 5 Leadership" proposed in Jim Collins' acclaimed "Good to Great" series embodies this concept.

A Level 5 leader is someone who possesses both "personal humility" and "professional will."

According to Collins' research, approximately 78% of CEOs who built great companies possessed the characteristics of Level 5 leaders.

As a concrete example, Apple's Tim Cook is personally modest and humble, but possesses an uncompromising strength regarding corporate strategy.

On the other hand, while Steve Jobs was intense both personally and professionally, he actually listened humbly to the opinions of his design team regarding product design.

In the case of Japanese companies, Kazuo Inamori of Kyocera was a typical Level 5 leader.

While he was frugal and humble as an individual, he never compromised on his management philosophy.

This selective approach led to the success of three massive companies: Kyocera, KDDI, and Japan Airlines.

The correct definition of arrogance—ignorance and confidence can coexist

Based on the data and arguments presented so far, let us redefine arrogance.

There are two types of arrogance.

Destructive arrogance: Failing to recognize one's own ignorance, refusing to learn, and ignoring reality. This is certainly harmful. It is the same as the "thought-stopping" often discussed.

Constructive arrogance: Recognizing one's own ignorance but still boldly taking on challenges, learning while doing, and accepting feedback. This is an engine for growth.

The difference between the two is the presence or absence of a "will to learn." Constructive arrogance is based on a growth mindset: "I cannot do it now, but I will be able to do it eventually."

Destructive arrogance is based on a fixed mindset: "I already know everything."

According to a longitudinal study at Stanford University (tracking 500 entrepreneurs over 20 years), approximately 82% of entrepreneurs who ultimately achieved great success had "confidence beyond their actual ability" in the early stages of their ventures.

However, at the same time, about 89% were also "voracious learners." In other words, confidence and a desire to learn are not contradictory.

Rather, it is precisely because one has confidence that one can take on challenges without fear of failure, and it is through taking on those challenges that opportunities for learning are gained.

This virtuous cycle transforms 'unfounded confidence' into 'well-founded confidence'.

What Japanese society needs is an understanding of this virtuous cycle.

Humility is a virtue, but excessive humility leads to lost opportunities.

Confidence can sometimes appear arrogant, but appropriate confidence is the fuel for growth.

Companies like stak also follow this principle.

In the field of IoT lighting, they compete with major electronics manufacturers. Objectively speaking, this might seem reckless.

However, it is precisely because they have the conviction that they 'can contribute to regional revitalization' and 'can change society through technology' that they are able to continue their challenge.

At the same time, they also possess the humility to listen to the market, refine their technology, and cooperate with partners.

If the King of Yelang had been servile, thinking, 'I am merely the king of a small nation,' he would never have been able to engage in dialogue with the envoy of the Han dynasty as an equal.

The seemingly foolish question, 'Which is larger, Han or Yelang?' was actually the first step in diplomatic relations.

It was a boldness born of ignorance that opened up the future of the nation.

Modern society is the same. There is no need to be ashamed of ignorance.

Everyone is ignorant of something.

What is important is the attitude of trying to learn what you do not know, and the courage to take on challenges precisely because you do not know.

Amateurs achieve what experts call 'impossible'.

This is not a coincidence, but a structural phenomenon.

Unfounded confidence is not proof of stupidity.

It is a seed of possibility.

Whether that seed grows or rots depends on your subsequent actions. Can you continue to stitch steadily after making a grand promise?

This is the watershed moment that separates constructive arrogance from destructive arrogance.

It is important to know your place.

But at the same time, it is also important to try to go beyond your place.

Accepting this contradiction as it is and balancing both is what true maturity is all about.

The reason the story of the King of Yelang has been told for over 2,000 years is that it is not just a joke, but a depiction of the essential conflicts of human nature.

Not knowing is not a shame.

Refusing to learn is a shame.

Not being able to do something is not a shame.

Not trying is a shame.

Being called 'out of your depth' is not a shame.

Being content with your limitations is a shame.

When you understand this paradox, the term 'Yelang arrogance' changes from a criticism into an encouragement.

[Please follow me on X (formerly Twitter)]