The Confidence Map (a book by Peter Atwater), what can China's leaders learn?

Trying to make sense of things

We've been reading Peter Atwater's excellent book, The Confidence Map. In the book, Atwater seeks to explain confidence's impact on decision making, markets, consumer behavior and economics.

There’s a lot more in the book than we will cover here. Go buy it, this is an affiliate link so you will be supporting us as well!

Atwater breaks the abstract mushy subjective idea of "Confidence" down into two feelings: Control and Certainty. These are two distinct feelings, Atwater explains:

We tend to lump our feelings of certainty and control together, believing that we can’t have one without the other. That isn’t true. When we are on an airplane, for example, unless we are the pilot, control rests with someone else. We have only a feeling of certainty—the presumption that the plane will land safely. (Peter Atwater)

A blank map of four quadrants consisting of high and low levels of control and certainty, the "confidence map", looks like this:

Atwater names the four quadrants of the map: Comfort Zone, Passenger Seat, Stress Center and Launch Pad.

The quadrant names make intuitive sense, but here's a bit more about them.

• Comfort Zone: Where most people want to be. Here people feel relaxed, capable of complex thought, collaboration and innovation.

• Passenger Seat: Feels like teaching a teenager how to drive. Overbearing and authoritative managers can make employees feel like they are in the passenger seat.

• Stress Center: Where most people do not want to be. Here people feel anxious, have difficulty thinking about the long-term and often make rash/bad decisions. Most responses fall under the “Five Fs”.

• Launch Pad: People are often here when making a self-driven life change, such as getting into their top-choice school or changing jobs. This is also where entrepreneurs feel they should be.

It's important to note that one's perception of a situation can be factually incorrect. An example in Peter Atwater's book is the frequent flyer who feels in control during a flight. This means individual feelings will differ to the same event. But we can use the map to estimate aggregate feelings in an industry, market or economy.

For example, here's how we would map Covid and zero-Covid events of the last few years. We start in the center at "normal". Covid hits, everyone feels vulnerable. Zero-Covid lockdowns of Wuhan and other cities seemed to be working, certainty increased, but control stayed low. Then it seemed Covid was stopped, China was the first nation to get through it (It worked!). Then Omicron showed up in Shanghai and a "small lockdown" started. It was then extended indefinitely.

The map already has a lot of text, but if we were to continue, it would go like this. Exiting zero-Covid with a let-it-rip policy kept confidence low as everyone got the virus and, unfortunately, people died. Then in January, lockdown controls ended, feelings moved towards "normal". Then, the re-opening disappointed and confidence slipped back into the Stress Center. Where (we think) people in China remain today (on an aggregate basis, evidenced by official NBS surveys).

The Extremes

Extremes in confidence occur in the top-right Comfort Zone. This is where decision making can break down, animal spirits take over and can sometimes signal market tops.

The opposite of confidence is vulnerability, found in the lower-left Stress Center. Here, decision making also breaks down, pessimism reigns and can sometimes signal market bottoms.

In general, people in the comfort zone like to stay there and people in the stress center will do whatever they can to get out (including “checking out mentally”).

What can China’s leaders learn?

China's leaders seem to focus more on consistency (stability) than raising feelings of control (among the populace). In fact, it seems they aren't aware of the control side of confidence:

"An op-ed in China’s state-run Economic Daily following up on the NDRC meeting said the key to boosting confidence continues to be “consistency and stability” in government policies, and an improving operating environment, as the private sector faces slowing demand, rising costs and financing difficulties." — SCMP via Michael Pettis

When we lack control, feelings usually present only in the stress center can move into the passenger seat.

When our need for control is repressed, the line that separates the Passenger Seat from the Stress Center disappears, and the two can seem indistinguishable. — Peter Atwater, The Confidence Map

Lacking control can make us feel vulnerable, unable to do anything. Atwater describes the typical reactions/responses we have in the Stress Center as the "Five Fs". Two are familiar: fight or flight. And in Atwater's words, "there are three other consistent Stress Center actions: follow, freeze and--if you'll pardon my French--fuck it."

Freeze and fuck it sound a lot like "laying flat" to us. Is lying flat a sign of feelings of lacking control? Maybe in addition to what the Party/Govt is already doing around consistency (stability), promoting feelings of control would be useful in boosting confidence? Wouldn’t it also help get private investors and entrepreneurs feeling more confident?

What do you think? Let us know in the comments.

“And therein lie the telltale signs of authoritarian, Passenger Seat–workplace leaders.

First, there is never a clear and adequate succession plan. No one—not those above nor those below, let alone the leader himself—can imagine his unexpected departure. Implicit to the environment is the perception of its permanence.

Second, the environment is one not of an empowered team but of henchmen. Loyalty and obedience, rather than competence and initiative, are cultural norms.

Finally, troubles are silenced. Not only are big problems never discussed, even minor concerns go unmentioned. Those in the Passenger Seat must comply not only with the dominance of the leader but also with what that leader wants to believe is true.”

Peter Atwater, The Confidence Map

Thank you for subscribing. If you enjoyed this post, please consider forwarding or sharing it.