The landmark Dunning-Kruger study found:
- More confident students (those who thought they did super well on a test) score less.
- Less confident students (those who didn't think they did too well) score higher.
That is, confidence tricks us into misjudging our skills, which can $&@#%*+ up our finances off the frosheeeezzzzy (see: confident investors during housing boom, dot.com boom, roaring 20s, etc., etc., etc.)
Think of an obscure subject you don't understand -- say fashion.
Human tendency? Because you're unfamiliar with the subject, and you haven't received feedback that your fashion skills suck, your mind becomes overconfident:
- "Oh! I know what makes great fashion!"
- "The fashion designers frickin SUCK!"
- "I can build a fashion empire if I want!"
BUT UH OH NO! You haven't studied patterns, color, design psychology, marketing, etc. -- so, you're unfamiliar with fashion's best practices that have evolved and been fine-tuned over decades/centuries by titans of the fashion industry.
Like most subjects, you get a reality check as you dig deeper into fashion and start seeing the complexities associated to the industry.
What Do You Well?
Think of something you've been doing for at least 5 years.
- You know the complexities associated.
- You're not as confident as you were when you started.
- You can spot fakers/pretenders/posers who think they know how to do X, BUT THEY DONT KNOW.
The more you know about X, the more you realize how much dumb you really are about X.
Google execs, for instance, don't know what the next big opportunity will be; they just focus on hiring the world's best people to ride an unpredictable future.
Talk to a startup n00b however?
- "My idea is the next big thing!"
- "I'm already picking out Porsches and Pateks!"
- "I can't tell you my idea, because if I do, you will make billions. Therefore, I will not tell you my idea so I can make the billions. THAT'S RIGHT SON"
Or take change-the-world college student Eddie:
- College student Eddie knows more about the economy than senior White House economic advisers.
- College student Eddie knows how to create more jobs than captains of industry.
- College student Eddie knows the Fortune 500 destroys small businesses without realizing that the bulk of every Fortune 500 company is made from an aggregate of many, many, many small businesses working together in one cohesive system.
The moment you find yourself super confident about something, SLAP YOSELF.
Then, dive into the complexities.
Posted on February 24
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