(Podcast audio link at the end of the post)

About four years ago, I attended a fascinating presentation given by Peter Atwater to a group of CEOs.

Peter, a renowned expert on confidence, studies how changes in confidence affect our inclinations, decisions and actions. He looks at things like books, music, architecture and food preferences when researching social, political, financial and business mood.

A few days prior to Peter’s presentation, the house majority leader at the time, Eric Cantor, was defeated in one of the most stunning primary election upsets in congressional history. Peter addressed this election loss in his presentation, observing that it served as another data point showing historically low confidence levels on main street versus Wall Street.

He observed that other politicians who failed to give their primary focus and attention on their own “backyard” would be in trouble over the next few years. The same went for companies who weren’t paying attention to the shift in consumers’ moods or aligning with demand.

Fast forward to today and much of what Peter shared with that group has come true.

Confidence, he said, is a cognitive state of being.

It turns out that when we feel confident, our horizons and timelines expand. We have a more optimistic, global, big picture viewpoint and believe that the future will be better than the present. This has a strong effect on our decision making and timelines, often resulting in us making big bets on future-focused things.

As an example, Peter has uncovered connections between people’s general optimism and architecture. He found that these times of high confidence were when great castles, college buildings and sports stadiums were built, often right before or at peak confidence levels. Look around at today’s technology sector and you will find that almost every major player is building a massive new headquarters.

On the flip side, when we don’t feel confident, our horizon window narrows dramatically; we’re much more focused on the present and what’s right in front of us, not the future. We see things as riskier and concentrate on preservation, not growth or future-focused investments. We want tangible problems solved now, not large problems in the future. In Peter’s terms, we’re about the “me here and now.”

We see this phenomenon today in the “buy local” movement and the preference for political candidates who focus on issues “at home.”

An example that tapped into this sentiment is Keurig® K-Cup® Pods. This product has seen explosive growth due to its convenience and speed, much to the dismay of the inventor who regrets the long-term ecological disaster that his invention has become.

At different times in our life, our confidence levels go through peaks and troughs. To make better decisions, we need to be aware of how our mindset effects our decision making and understand whether we are at low point of confidence or a peak. Both extremes can get us into trouble.

If you can’t see the embedded player above, you can listen to it on iTunes or Stitcher.

Check out my interview with Peter on our Outperform podcast to learn more about his work and his projections around what political candidates, financial markets, products and business models will be successful in our current environment and upcoming years.