How Not to Invest: The ideas, numbers, and behavior that destroy wealth—and how to avoid them

by Barry Ritholtz

David Dunning is a Professor of Psychology at the University of Michigan371 who studies human understanding. In 1999, he and Justin Kruger, a graduate student, published an in-depth study of how people, regardless of their expertise, evaluate their own skills. Titled “Unskilled and Unaware of It,”372 their study found that people with limited competence in a specific area overestimated their abilities in that area. Metacognition, it turns out, is a discrete skill unto itself. It tends to increase as your skill in the underlying domain increases. As you improve at a thing, your ability to evaluate your skills at that thing also improves.

DK effect