The Dunning-Kruger Effect

Have you ever noticed that when you learn a new word, it starts to show up everywhere? Similarly, whenever I get a new car, I become hyper-aware of every other car of the same model on the road. Last week I was introduced to the Dunning-Kruger effect, and suddenly I’m detecting it everywhere, which I like to think is actually the opposite of the Dunning-Kruger effect.

I first read of this phenomenon in an excellent essay in The New Yorker magazine in which writer James Surowiecki warned about the dangers of financial illiteracy, a nagging concern of mine. “[T]he less people know, the more overconfident in their abilities they tend to be….This is known as the Dunning-Kruger effect: people who don’t know much tend not to recognize their ignorance, and so fail to seek better information.”

As soon as I mentioned this, a friend recommended a five-part essay by filmmaker Errol Morris on a New York Times blog that was all about, you guessed it, the Dunning-Kruger effect. As it turns out, David Dunning is a professor of social psychology at Cornell University, and Justin Kruger was the graduate student who assisted him in researching and writing a 1999 academic paper called “Unskilled and Unaware of It: How Difficulties of Recognizing One’s Own Incompetence Lead to Inflated Self-assessments.”

Their conclusion: It is possible to be too stupid to realize how stupid you are.

It may seem to be a New York thing, but that son of the Midwest, former Secretary of Defense Donald Rumsfeld, also seemed to have a good grasp of the Dunning-Kruger effect. In a 2002 NATO press conference, Rumsfeld famously warned of the “known unknowns” and the “unknown unknowns” involved in counterterrorism. But it is a hallmark of competence to realize one’s own limitations – in talent, in skills, in knowledge. As Dunning himself told Morris, Rumsfeld’s comment on the unknown unknowns was “the smartest and most modest thing [I had] heard in a year.” It was an acknowledgement not only that we have questions – the “known unknowns” – but that there are questions we don’t even know we should ask. (Morris took it a step further, reminding his readers that there are “unknowable unknowns” — questions that couldn’t be answered even if we knew to ask them.)

So what does this mean in business? Well, it’s all over the place. Even the title of Dunning and Kruger’s paper, the part about inflated self-assessments, reminds me of a truism that was pointed out by a supervisor early in my career: The best employees will invariably be the hardest on themselves in self-evaluations, while the lowest performers can be counted on to think they are doing excellent work. (The chorus of readers who have the chore of performing employee reviews says “Amen.”)

In my line of work, the most competent journalist is often the one who is willing to ask the stupidest question. Bethany McLean was a 30-year-old reporter for Fortune when she famously asked, “How exactly does Enron make its money?” (That turned out to be an unknowable unknown, but McLean surely didn’t know that when she asked the question.) Compare the naïve brilliance of her question to the idiocy of that presumed sophisticate, J.P. Morgan CEO Jamie Dimon, telling the Financial Crisis Inquiry Commission, “Somehow we just missed that home prices don’t go up forever.” What would happen if housing prices stalled or reversed was a relatively easy question to answer, but no one asked the question.

In The New Yorker, Surowiecki applied this concept to personal finance: “If financial education taught people only how little they actually know, it would accomplish quite a lot.” But it doesn’t take much imagination to realize that, in your business and in every other human endeavor, factors are contributing to your outcomes even if you don’t know it. The best you can do is control for the knowns, seek out answers to the known unknowns and be smart and modest enough to realize that your intelligence is imperfect in ways you can’t even imagine. 

Gwen Moritz is the highly competent editor of Arkansas Business. She can be reached at [email protected].