Here is some stuff I am reading and thinking about this weekend…
Idea I’m Thinking – Dunning Kruger Effect
One day in 1995, a large, heavy middle-aged man robbed two banks in the American city of Pittsburgh. He did it in broad daylight, without wearing a mask or any sort of disguise. And he smiled at surveillance cameras before walking out of each bank. Later that night, police arrested a surprised McArthur Wheeler. When they showed him the surveillance tapes, Wheeler stared in disbelief. “But I wore the juice,” he mumbled. Apparently, Wheeler thought that rubbing lemon juice on his skin would render him invisible to videotape cameras. After all, lemon juice is used as invisible ink so, as long as he didn’t come near a heat source, he should have been completely invisible.
Police concluded that Wheeler was not crazy or on drugs — just incredibly mistaken.
The episode caught the eye of the psychologist David Dunning at Cornell University, who along with his graduate student, Justin Kruger, went on to study what was going on. They reasoned that, while almost everyone holds favorable views of their competence in various domains, some people mistakenly assess their competence as being much higher than they actually are. This “illusion of confidence” is now called the Dunning-Kruger Effect, and describes the cognitive bias to inflate self-assessment.
“I don’t know that I don’t know” is such an unsettling, ego-smashing thought. But Dunning Kruger Effect is what we all suffer from. In tasks where we lack expertise, like stock market investing or economic forecasting, we often overestimate our actual knowledge. Worse, we are unable to recognize our own incompetence…simply because of the fact that we are incompetent.
Of course, we are not incompetent in everything we do in life and thus the Dunning Kruger Effect does to torment us all the time. Sometimes we try things that lead to favorable outcomes. But other times — like the lemon juice idea — our approaches are imperfect, irrational, inept or just plain stupid.
Now, even when experts tend to be aware of just how knowledgeable they are, they often make a different mistake: they assume that everyone else is knowledgeable, too. The result is that people, whether they are incompetent or highly skilled, are often caught in a bubble of inaccurate self-perception. When we are unskilled, we can’t see our own faults. When we are exceptionally competent, we don’t perceive how unusual our abilities are.
So if the Dunning Kruger effect is invisible to those experiencing it, what can you do to find out how good you actually are at various things? Mr. Dunning himself answers –
First, ask for feedback from other people, and consider it, even if it’s hard to hear. Second, and more important, keep learning. The more knowledgeable we become, the less likely we are to have invisible holes in our competence. Perhaps it all boils down to that old proverb: When arguing with a fool, first make sure the other person isn’t doing the same thing.
The trick is to not be fooled by illusions of superiority and to learn to accurately reevaluate our competence. After all, as Confucius reportedly said, real knowledge is knowing the extent of one’s ignorance.
Thoughts I’m Meditating On
Take risks in your life. If you win, you can lead. If you lose, you can guide.
~ Swami Vivekananda
One of the important things in stocks is that a stock does not know that you own it. The stock just sits there; it doesn’t care what you paid or the fact that you own it. Any feeling I have about the market is not reciprocated. I mean it is the ultimate cold shoulder we are talking about here.
~ Warren Buffett
Articles I’m Reading
- Howard Marks: Uncertainty II (Oaktreee)
- Why we’re blind to probability (Collaborative Fund)
- Under pressure (Reformed Broker)
- Nobody talks about failure in Silicon Valley, yet 90% of startups fail (Gagan Biyani)
- Six Stoic rituals that will make you happy (Daily Stoic)
- Idea generation (Sam Altman)
- Einstein’s two mistakes (The Conversation)
- Yoga with Adriene: How the YouTube star won lockdown (Guardian)
A Question for You
We all waste time doing tasks that are unnecessary and unimportant.
Ask yourself – What tasks should I stop doing?
That’s about it from me for today.
Have a great weekend. Stay safe.
Featured Image Source: Verywellmind