198. Dunning-Kruger Effect: Behavioral Economics Foundations

The Brainy Business | Understanding the Psychology of Why People Buy | Behavioral Economics

In today’s episode, we are talking about one of my all-time favorite concepts, the Dunning-Kruger effect.

In its simplest form, the Dunning-Kruger effect essentially says that people who are unskilled will tend to overestimate their abilities and those who are very skilled experts will underestimate theirs. Someone who undersells their skills could be more qualified than that person who seems very confident. In this episode I explain what the Dunning-Kruger effect is, how understanding it can help you be more effective, how to leverage it in business, and some top tips for navigating this natural tendency of the brain.

Show Notes:

• [00:41] In today’s episode, we are talking about one of my all-time favorite concepts: the Dunning-Kruger effect.
• [03:48] To put the Dunning-Kruger effect into its simplest form, it would say essentially that people who are unskilled will tend to overestimate their abilities and those who are very skilled experts will underestimate theirs.
• [04:34] Think about a kid who graduates from high school and believes they know everything.
• [05:23] When someone graduates from high school, they are at a point that has come to be known as the “Peak of Mount Stupid.” At the peak of mount stupid, someone has lots of confidence, but it isn’t built on much competence. They have no idea how much they don’t know so they are blissfully unaware of their precarious position and how close they are to falling right off the cliff. When this kid gets to college and realizes they don’t know nearly as much as they thought they did, they fall into the “Valley of Despair.”
• [07:21] This is an opportunity to look at the things you don’t yet know and begin to research them. This gradual climb is called the “Slope of Enlightenment.” You slowly gain confidence as you grow your competence…though you might never get back up to the level of confidence you had way back at the peak of mount stupid.
• [08:14] If you take a moment now to reflect upon your own life, I am guessing you could pretty easily come up with at least half a dozen examples where the Dunning-Kruger effect reared its ugly overconfident head.
• [09:43] While you are an expert in one thing, you are way overconfident in something else, where you don’t have any idea of the ocean of stuff you don’t know.
• [11:29] How the effort heuristic relates.
• [12:43] I can live in blissful unawareness of my inadequacies forever and never have it be an issue until I try the thing enough to realize that I should have been a little less confident.
• [13:56] Have some awareness and don’t assume you know better than everyone else.
• [14:54] There is a flip to this as well. (It isn’t all about mount stupid). Remember, there is a point where you become an expert and then grossly underestimate your own abilities.
• [16:11] You can’t do this for everything, but on the things that matter it is worth doing a little Dunning-Kruger evaluation every so often to discover if you are underestimating or overestimating your confidence and competence at this point.
• [17:11] Look at your own moments where you have high confidence and low competence (or high competence with not enough confidence) to determine if you are showing up in the best way possible. Also, look at others to determine where they are on that Dunning-Kruger scale.
• [18:37] Another place where the Dunning-Kruger effect is really critical to keep in mind is when you look at coaching or giving advice to members of your team.
• [20:10] Giving them too many things to change while they are feeling the stress in the “valley” is going to make the problem worse, so you need to be selective on what advice to give them.
• [21:23] Know that when people have low competence in something, they are likely to be overconfident in their own abilities. Those who are very competent have a tendency to underestimate their own skill or ability.
• [22:02] There is an interesting point when there is an increase in knowledge where you realize all of what you don’t know—that increased competence results in a drastic drop in confidence.
• [22:46] As you build knowledge, know that you will gradually underestimate your abilities, skills, and all the effort and training that went into what you now know and can do. Just because it is easy for you doesn’t mean it isn’t of value to someone else. Especially when someone is new, overshare information to help with where you both are on the Dunning-Kruger scale.
• [23:33] Don’t take your spot on the Dunning-Kruger scale as a fixed point. The context is always changing, there are new discoveries and technologies and experts every day.
• [26:07] If you enjoy the experience I’ve provided here for you, will you share about it? That could mean leaving a rating/review or sharing the episode with a friend (or 10!)

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Get the Books Mentioned on (or related to) this Episode:

• Nudge, by Richard Thaler & Cass Sunstein
• What Your Customer Wants and Can’t Tell You, by Melina Palmer
• Outsmart Your Instincts, by Adam Hansen
• A More Beautiful Question, by Warren Berger
• Sludge, by Cass Sunstein

Top Recommended Next Episode: Confirmation Bias (episode 102)

Already Heard That One? Try These:

• Focusing Illusion (episode 89)
• Priming (episode 18)
• Optimism Bias (episode 34)
• Planning Fallacy (episode 114)
• Expect Error (episode 39)
• Give Feedback (episode 40)
• Counterfactual Thinking (episode 68)
• Framing (episode 16)
• IKEA Effect (episode 112)
• Reframing Annoying Disruptions to Support Innovation, with Adam Hansen, coauthor of Outsmart Your Instincts (episode 176)

Other Important Links:

• Brainy Bites - Melina’s LinkedIn Newsletter
• Dunning-Kruger Original Research
• Baader-Meinhof Phenomenon

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