I was writing about importance of continuous personal financial education for Day 20 of The Personal Finance Challenge today. The following is an excerpt of the entry.
****
When I first learned about the online community of personal finance, I was shocked. “People, talk about their money with other people?” I questioned and thought the idea was ludicrous. In retrospect, I realise that I ‘did not know what I did not know’ about personal finance, and my first response to the subject was to brush it off. My arrogance took the better of me and it left me at the ‘peak of mount stupid’.
The Dunning-Kruger Effect
Essentially, the Dunning-Kruger effect described how we human beings have an inherent cognitive bias that causes us to think that we are smarter and more competent than we actually are. In other words, the foolish do not realise how foolish they are; and because of that they do not seek to escape their foolishness.
That dangerous state of being stuck in foolishness was the state I was in. In that state, I would have (1) overestimated my knowledge about personal finance. I would think that my money management skills were sufficient and there was nothing else for me to learn about personal finance. The foolish me would (2) not be able to recognise the expertise of others who share their ideas and thoughts about personal finance. A mental smog would cover my vision and I would immediately assume that what others knew will not be adding value to myself. Moreover, the riskier bit is that I would (3) fail to recognise my own mistakes due to my actual lack of competency in the matter of personal finance. Let’s just say that I had personally racked up a significant credit card debt during those foolish times. Now, the Dunning-Kruger effect is not a symptom of low IQ, but instead a proneness that is applicable to anyone for any type of knowledge domain. A person maybe an expert in one topic, but may be stuck in the ‘peak of mountain stupid’ for another topic. We need to accept that we are fallible humans after all, the understanding of this mental weakness of ours is a step towards overcoming that state of foolishness.
****
This led me to think about how many different “peaks of mount stupid” am I on at this very moment? How very little do I know about the world?
Truly, learning is a life-long journey.
Stay humble, continue learning.
Ruiz