How to Create Wealth, the Dunning-Kruger Effect, & More

As we exit the free-money era when the markets minted many new self-proclaimed geniuses, the Dunning-Kruger Effect is more relevant than ever.

The Dunning-Kruger Effect is a cognitive bias in which people with low ability at a given task are prone to overestimate their ability at that task.

Put simply, humans are notoriously incapable of objective evaluation of their competency levels.

The cognitive bias was first identified by psychologists David Dunning and Justin Kruger in a 1999 study. Their paper, entitled Unskilled and Unaware of It, summarized, “People tend to hold overly favorable views of their abilities in many social and intellectual domains.”

 
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