Dunning kruger effect Flashcards
What is the Dunning-Kruger Effect?
It explains how people with low knowledge often overestimate their abilities, while those with high expertise tend to underestimate themselves.
What characterizes the ‘Peak of Mount Stupid’ phase?
Beginners think they know everything because they lack awareness of their limitations.
Give an example of the ‘Peak of Mount Stupid’ phase.
A new investor thinks they can predict the stock market after one successful trade.
What is the ‘Valley of Despair’ phase?
More learning leads to realizing how complex things are.
Provide an example of the ‘Valley of Despair’ phase.
The investor loses money and realizes investing is harder than expected.
What happens during the ‘Slope of Enlightenment’ phase?
As expertise grows, confidence gradually increases but remains realistic.
Give an example of the ‘Slope of Enlightenment’ phase.
A seasoned investor understands risk and makes informed decisions.
What is the ‘Plateau of Sustainability’ phase?
Experts acknowledge the limits of their knowledge but can make highly informed decisions.
Provide an example of the ‘Plateau of Sustainability’ phase.
An experienced investor accepts market unpredictability and manages risk wisely.
