The Curse of Knowledge

After putting a new trading system in place last November, I’ve found it difficult to not fuck with it. Especially considering how this year is starting out. So how do you keep yourself out of trouble? Write about behavioral finance stuff instead of meddling with your portfolio. I’m starting with a list of about 50 or so cognitive biases. More has been written on cognitive biases than you probably care to read, but writing about it keeps me busy. It stops me from dicking around checking quotes and charts. This routine should keep me busy for most of the year if I post one per week. My first post was on the Sunk Cost Fallacy.

And now the Curse of Knowledge…

The Curse of Knowledge occurs when an individual communicating with others assumes they have the background and knowledge to understand what’s being said. Simply put by Shane Parrish, it’s the inability to put ourselves in the shoes of someone less informed.

At a technical level, experts organize knowledge differently than novices. The experts often infer knowledge on the part of the novice and wind up omitting the reasoning behind how they arrived at their understanding of a variety of complex subjects.

The term “curse of knowledge” was originally coined in 1989 by economists Colin Camerer, George Loewenstein, and Martin Webber in an article published in the Journal of Political Economy.

There’s another side of the coin. In addition to assuming others have the knowledge we do when communicating an idea, the curse of knowledge can often stop us from sharing ideas altogether.

Derek Sivers describes it as “obvious to you, amazing to others.” In his book Hell Yeah, or No, he says, “Everybody’s ideas seem obvious to them … So maybe what’s obvious to me is amazing to someone else? … We’re clearly bad judges of our own creations. We should just put them out there and let the world decide.”