Confidence consists of positive expectations for favorable outcomes. Confidence influences the willingness to invest—to commit money, time, reputation, emotional energy, or other resources—or to withhold or hedge investment. This investment, or its absence, shapes the ability to perform. In that sense, confidence lies at the heart of civilization. Everything about an economy, a society, an organization, or a team depends on it. Every step we take, every investment we make, is based on whether we feel we can count on ourselves and others to accomplish what has been promised. Confidence determines whether our steps—individually or collectively—are tiny and tentative or big and bold.

Confidence is a sweet spot between arrogance and despair. Arrogance involves the failure to see any flaws or weaknesses, despair, the failure to acknowledge any strengths. Overconfidence leads people to overshoot, to overbuild, to become irrationally exuberant or delusionally optimistic, and to assume they are invulnerable. That’s what induces people to become complacent, leaders to neglect fundamental disciplines, investors to turn into gamblers. But underconfidence is just as bad, and perhaps worse. It leads people to underinvest, to under-innovate, and to assume that everything is stacked against them, so there’s no point in trying.

It is human nature to set expectations based on assumptions about whether conditions seem to be improving or deteriorating, about whether the game can be won or will inevitably be lost. We seek patterns and trends even in events that are random, like gamblers who believe that when they hold a few good hands of cards, they must be “hot,” and that the next hands will be equally good. And for nonrandom activities, where human effort and skill make a difference, success and failure easily become self-fulfilling prophecies.

Patterns, apparent or real, become enshrined in myths and superstitions that have an effect on those playing the game. In baseball, the Chicago Cubs always seemed to go downhill during the “June swoon,” making June a psychological hurdle. The Boston Red Sox always seemed to play well during the season and disappoint their fans by losing at the end. The New York Yankees always seemed to beat the Red Sox. This was blamed on the “Curse of the Bambino” imposed on Boston when baseball star Babe Ruth left the Red Sox for the Yankees.

In the 2003 playoffs, the Red Sox lost to the Yankees in the eighth inning of the last game of the series when manager Grady Little left pitcher Pedro Martinez in the game, even though he had already thrown more than 100 pitches and (in hindsight) was fatigued. Little, who was later fired (but not because of that call, Red Sox owners said), became the symbol of the curse in action, and fans called for his departure even though he had led the team to a winning season, as though serving him up as a scapegoat would purge the team of its past. But fans’ extreme anger reinforced the image of the Red Sox and their extended family as inevitable losers, and sore losers at that. “In Boston, only the World Series counts as winning,” Little said. Such reactions undermined confidence that the Red Sox would ever break their curse.

In February 2004, when the Yankees landed Alex Rodriguez, considered the best player in baseball, after the Sox failed to make a deal with him, the “curse” was said to continue.

Failure and success are not episodes, they are trajectories. They are tendencies, directions, pathways. Each decision, each time at bat, each tennis serve, each business quarter, each school year seems like a new event, but the next performance is shaped by what happened last time out, unless something breaks the streak. The meaning of any particular event is shaped by what’s come before. The same $10,000 in someone’s bank account can make him feel rich and getting richer if he had only $5,000 the day before and $1,000 the day before that, or poor and getting poorer if he had $50,000 the previous day and $100,000 two days earlier. History and context shape interpretations and expectations.