Derek Van Shaik on the Dunning-Kruger effect

An easy way to spot a novice in a field is when they claim to know everything within that field.  A true expert knows the vastness of the field and how little they know within the vast field.  Ever hear someone say, "I know just enough to be dangerous?"  That's typically said by someone who is starting to come down from the peak of Mount Stupid and begins to acknowledge how little they know on the topic.  However, there are some people who work in a field who stay at the top of Mount Stupid by subconsciously shielding themselves from learning anything further, because learning can be intimidating, humbling and cause insecurities since it reveals how little they know.  Since they don't experience this Valley of Despair, they don't get to reach this inclining Slope of Enlightenment to gain real competence and expertise, which builds authentic confidence.

~ Derek Van Shaik, "What The Top Of Mount Stupid Looks Like - FTX's Caroline Ellison," YouTube, November 17, 2022

Rolf Dobelli on the limits of expertise and value of expanding our circle of competence

If you take your problem to an expert, don't expect the overall best solution. Expect an approach than can be solved with the expert's tool kit.  The brain is not a central computer.  Rather, it is a Swiss Army knife with many specialized tools.  Unfortunately, our "pocketknives" are incomplete.  Given our life experiences and our professional expertise, we must try to add two or three additional tools to our repertoire - mental models that are far afield from our areas of expertise.  For example, over the past few years, I have begun to take a biological view of the world and have won a new understanding of complex systems.  Locate your shortcomings and find suitable knowledge and methodologies to balance them.  It takes about a year to internalize the most important ideas of a new field, and it's worth it: Your pocketknife will be bigger and more versatile, and your thoughts sharper.

~ Rolf Dobelli, The Art of Thinking Clearly, p. 277

Rolf Dobelli on long-term thinking and persistence

Once you've identified your circle of competence, stick to it as long as possible.  Likewise if you find a good spouse, a suitable place to live or a rewarding hobby.  Perseverance, tenacity and long-term thinking are highly valuable yet underrated virtues.

~ Rolf Dobelli, The Art of the Good Life, "The Secret of Persistence," p. 61

Peter Lynch on investing and simplicity

Never invest in any idea you can't illustrate with a crayon.

~ Peter Lynch

Charlie Munger on the balance between competency and gumption

You have to strike the right balance between competency or knowledge on the one hand and gumption on the other. Too much competency and no gumption is no good.  And if you don't know your circle of competence, then too much gumption will get you killed.  But the more you know the limits to your knowledge, the more valuable gumption is.

~ Charlie Munger

(As quoted by Jason Zweig, "A Fireside Chat With Charlie Munger," The Wall Street Journal, September 12, 2014

Peter Lynch on investing: "stick to what you can understand"

The stock market is not like Olympic diving, so you won’t get any points for difficulty.  Stick to what you can understand.

~ Peter Lynch

(Thanks to @BuyandHoldd for tweeting this quote.)

Richard Parsons on business focus

The older you get, the more you come to appreciate the wisdom of the ages.  The old expression “stick to your knitting” provides a broader lesson.  These attempted vertical mergers—where a company acquires a business that is foreign to them, where they don’t have the cultural competence or the technical competence to understand what they’re getting—those usually turn out to be a mistake.

~ Richard Parsons, "Wisdom From the C-Suite," Barron's, July 31, 2021

Charlie Munger on circle of competence

I try to avoid being stupid...  The single most important thing is to know where you are competent and where you aren't.  The human mind tries to make you believe you are smarter than you are.

~ Charlie Munger, Vice Chairman of Berkshire Hathaway, California Institute of Technology interview

(As quoted in the January 2 issue of Barron's.)

Thomas Sowell on the circle of competence

It takes considerable knowledge just to realize the extent of your own ignorance.

~ Thomas Sowell, tweet, November 13, 2020

Dan Ferris on financial advisors pretending to know all the answers

In finance, if somebody pretends, if they always have an answer for you, it's a red flag.

~ Dan Ferris, "Any Investor Must Know Thyself," Stansberry Investor Hour, 11:45 mark, September 10, 2020

Chris Pavese on the Dunning-Kruger effect (circle of competence)

The more we learn, the more questions we have. But the reverse is also true. The fewer questions we ask, the less we know. This is why poor students often feel more successful than the brightest in the bunch. They lack insight into their own limitations. In other words, without an appreciation for the vast body of knowledge out there, it’s impossible to know how little they know. The first principle is that you must not fool yourself – and you are the easiest person to fool.

In the field of psychology, this cognitive bias is known as The Dunning–Kruger Effect. It comes from the inability of people to recognize their lack of ability. Without self-awareness, it can be challenging to evaluate competence or the lack thereof. Said differently, the more incompetent you are, the less you’re aware of your own incompetence.

~ Christopher Pavese, CIO of Broyhill Asset Management, The Broyhill Letter, August 2020

Warren Buffett on investment advice from Keynes

John Maynard Keynes essentially said, don't try and figure out what the market is doing.  Figure out a business you understand, and concentrate.

~ Warren Buffett

Albert Einstein on learning and knowledge

The more I learn, the more I realize how much I don't know.

~ Albert Einstein