So what is the Dunning-Kruger Effect?
Back in the late 90s, David Dunning and Justin Kruger, professors from Cornell College, did a study that concluded that the less an individual knows about a particular topic, the more likely they are to overvalue their skill, ability, or knowledge on that topic.
Let me use an example from my own life to demonstrate the Dunning-Kruger Effect:
Around 15 or 20 years ago, a friend of mine was having a conversation with his dad about the Gate River Run. My friend found out that he could win a substantial amount of money by winning the race. Now, my friend was not a runner; he was a good athlete, but people who win the Gate River Run average a mile in 4.5 minutes—they fly. My friend couldn’t run a single 4.5-minute mile, so his lack of knowledge about that topic led him to believe that he could just go out and win this race against professional athletes.
That’s in essence what the Dunning-Kruger Effect is—you don’t know what you don’t know, which leads you to overvalue your competency.
In real estate, I see this often. We are in the Information Age where you can Google just about anything. I’m sure doctors have seen this as well: Many think that because they pulled information from WebMD, they know all about what’s wrong with them. In real estate, we have all this information in front of us, but the problem isn’t getting the information, but rather, knowing what to do with it.
Quite frankly, after 12 years in this business, there are still houses, areas, neighborhoods, and problems that I still can’t say I know everything about. There are a lot of moving parts in real estate.
So how does the Dunning-Kruger Effect apply to your life?
Ask my wife—I am the worst about this. I often think I know more about a particular subject than I really do, and she is kind enough to remind me of that on a daily basis. Just remember that, as you’re going through your job, your relationships, and major life decisions, we can’t possibly know everything we need to know in order to make a perfect decision. We need the help of experts and the people around us to make important decisions, whether it’s about investing, healthcare, or real estate.
If you have any questions or examples of the Dunning-Kruger Effect, feel free to reach out to me. I’d love to hear from you.