Neville Chamberlain was 49 years old when he was elected to the British House of Commons. This was surprising because he came from a politically active family. His father Joseph Chamberlain was one of the most powerful politicians of the UK.
What’s more surprising is that even with a late start, Nevill Chamberlain ended up becoming the Prime Minister! In fact, even today, 49 remains the greatest age for anyone elected to the House of Commons who went on to become the Prime Minister.
The prolific Chamberlain
One of the first posts Chamberlain received was as a Health Minister. Within 2 weeks of being given the post, Chamberlain came up with an agenda containing 25 bills to fix all health issues.
He deftly negotiated the Housing Act. That improved housing conditions for a lot of poor folks – which directly led to their better health. His negotiations led to building of half a million more homes and fixed the post WW1 housing shortage.
He also created a system where grants were given by the central government to poor local governments. He had to equalize resources given to poor and wealthier districts which required balancing the interests of a lot of politicians.
He introduced a lot of public healthcare services. And passed 21 of his 25 bills into law!
Chamberlain fixes the budget
In 1931, the British government was facing a financial crisis. They were expecting to see a shortfall of 120 million pounds! To fix the situation, Chamberlain was made the Chancellor of the Exchequer.
The problem was that the UK had a lot of WW1 war debt. So Chamberlain came up with a genius idea. He simply asked the public to convert their war bonds to new lower interest bonds. People listened. And voluntarily participated in the scheme. Helping the government reduce their annual interest payments from 5% to 3.5% of the national debt.
Chamberlain also enacted tariffs on foreign goods and imposed strict budget discipline. And by 1934, Britain was able to declare a budget surplus again!
Managing Hitler
Perhaps Chamberlain’s most popular and widely liked act arrived after he had become the Prime Minister. In 1938, Adolf Hitler’s Germany had absorbed Austria. And British Secret Services had confirmed news that Germany would next invade Czechoslovakia on 25th September. Chamberlain flew to Germany on 15th September to meet with Hitler personally.
He spent 3 hours with Hitler and asked Hitler what would it take for him to not go to war. Hitler’s demand was the German speaking Czech regions of Sudetenland.
Over the next few weeks, Chamberlain worked tirelessly to get Czechoslovakia, their allies France, Italy, Germany, and Great Britain to agree to terms to avoid war. Hitler was given German majority regions in return for a promise that he would not wage war.
Promise of peace
When Chamberlain returned from Munich, large crowds mobbed him. King George VI wrote him a letter of gratitude and invited him to visit the palace right away. But because of the cheering crowd that had packed the streets, it took Chamberlain more than 90 minutes to reach the palace from his home!
When Chamberlain was asked to address the crowd from the balcony of the Buckingam Palace, he famously declared that he had achieved “Peace for our time!”
Chamberlain’s deft negotiations had bought lasting peace. Or so it seemed. Less than 6 months later, Hitler violated the agreement and absorbed the whole of Czechoslovakia. Less than a year after the Munich Conference, Hitler invaded Poland and began World War 2!
And Neville Chamberlain had to resign from his post!
“When you feel like bragging, it’s probably time to sell.” – John Neff
John Neff, a highly successful investor, crystalized human nature in a quote. It’s at your peak that you are overconfident the most.
Jeff Bezos was singing praises of how the internet is going to change the world. He was named Time Magazine’s Person of the Year in December of 1999. And then the dotcom bubble burst. Amazon share price went from $107 to below $6!
Peak emotion
Success naturally breeds confidence. And confidence loops back to more success. It’s this cycle that heightens our emotions. Makes us overconfident. It’s when we feel that we are invincible that we stop being cautious. Which inevitably leads to crash!
Chamberlain completely misread Hitler and his ambitions. He believed that because he had fixed Britain’s health and budget, he would be able to fix Europe’s war as well. Past personal success made him feel invincible. Made him discount Hitler.
There were a lot of ways to assess Hitler’s motivations. Or at least be wary of the fact that Hitler would not remain true to his word. But Chamberlain’s caution went out of the window as he chased higher highs of success.
It’s the same issue with all of us. Success leads to overconfidence. Overconfidence leads to failure.
How can we avoid the overconfidence trap?
- Smart Kings used to hire court jesters. Someone who would point out their flaws to keep them humble. That’s what you’ve got to do. Constantly look out for criticism. Opposite viewpoints. Disconfirmation of your ideas. And think on what if these criticisms are correct? The greatest thing you can do is surround yourself with people who give straight blunt feedback.
- Become more self aware of your emotions. Keep a journal and note down your emotions. Recognize that peaks occur at the points when you start feeling invincible. Counter trade yourself when you feel those peak emotions. Do the opposite of what you feel. Become more cautious.
- Precommit. Create strategies and set rules on what you should do beforehand. So that you can counteract euphoria.
Action Summary:
- Avoid the overconfidence trap. Track your sentiments. And do the opposite when you feel like bragging.