In 1999 David Dunning a Professor of Social Psychology at Cornell, produced a study which developed the Dunning-Kruger effect; which basically states that our incompetence masks our ability to recognize our incompetence.
Dunning has long purported that the sign of intelligence is tied to the ability to realize that there are things that you don’t know that you don’t know. Donald Rumsfeld gave a speech on Terrorism in which he was lambasted by the media for the following comments: There are things we know we know about terrorism. There are things we know we don’t know. And there are things that are unknown unknowns. We don’t know that we don’t know.
Being confident about unknown unknowns is one of the core principles behind financial victimization. When investors do not have the ability to recognize their own incompetence in the area of financial decision making they are easy prey for scams and fraud.
No one wants to admit to weakness, we all believe we are better than we truly are. It is a common thread in the trends of human nature. The most prolific danger however exists within the unknown unknowns as this characteristic will ensure our loss consistently.
The blind spot in assuming the unknown leaves one susceptible to manipulation. As an example when I was selling Life Insurance I would often have to work through CPA’s or CFO’s and they would often be a major stumbling block to getting deals done. My method with them was to simply drop a few well designed concepts with their lingo which made them feel that I was their equal when it came to the knowledge of their expertise. This of course was far from the truth but this bluff ALWAYS worked. It worked because these professionals simply knew what they knew and had no awareness that there were things they didn’t know such as being able to have their beliefs manipulated. It is much the same for investors and consumers.
When you gain a small bit of knowledge this is usually extrapolated into your believing you know well more than you truly know. When this happens you are totally blinded to the unknown unknowns because your beliefs are locked into the known. The conman knows how to play the unknowns and also how to manipulate the unknown. Just a few well-placed questions can uncover just what you know and more importantly what you don’t know. Please remember it is always what you don’t know that is most dangerous. Even when investors develop a process for the completion of due diligence they often will miss key issues because they do not know the necessary questions to ask.
Acknowledging that there are unknowns as well as unintended consequences behind every decision will help you develop a better decision making process. Never be afraid to admit there are unknown unknowns which will allow you the open-mindedness to seek the best answers.
One of the major aspects of counter-intuitive thinking is the knowledge of being unaware. Most people are familiar with being aware of something, yet the counter-intuitive mindset is the understanding of the sense of being unaware, in other words being aware that there is information and knowledge that one doesn’t know. You know you don’t know. That is truly counter-intuitive and that thought process is very important in protection from financial victimization. It might just be the armor one can wear to be fully protected against all forms of financial victimization.
YOUR Best Interest Is OUR Only Concern!