The Value of Knowing What You Don’t Know

Some of the best professional advice of my career came early, a few months into my first job after law school. I had been hired at Universal Underwriters Insurance Company to handle employee dishonesty claims. I reported to a bristly ex-cop named Lee, a no-nonsense guy with decades of experience. He had mixed feelings, which he shared freely, about supervising a young lawyer with a head full of expensive “book learning” and the hands-on experience of a newborn kitten. 

Lee was a relentless auditor of everything I did.  He interrogated my work with inquisitorial intensity that made me question my employment more than once. One day, after picking apart a file memo I’d written, he leaned back in his chair and announced, “If you think I’m hard on you, it’s because I need you to know what you don’t know. You’re still figuring it out and I’m trying to help you.” And with that he went to lunch, leaving me standing in his doorway, puzzled.

It took me years to appreciate Lee’s point.  I need you to know what you don’t know was not an admonition to learn more.  Certainly, knowledge is important – and more tends to be better than less - but unless you know absolutely everything about a topic it is far more important to understand the limits of your own expertise. Knowing what you don’t know is the only way to avoid crossing the line into incompetency. 

Paradoxically, those with the least expertise, the ones whose common sense should be shrieking BE CAREFUL! are the most likely to cross that line and plunge confidently into total disaster. This is due to a meta-cognitive phenomenon called the Dunning-Kruger Effect.  It turns out humans are wired to overestimate our own performance in areas where we have no prior experience.  We tend to assume we’re doing great as long we don’t know how to grade ourselves. It’s an evolutionary quirk that can lead to terrible outcomes.  I witnessed one myself a few years ago. A Utah dealer called me to ask about collateral protection insurance. I started into my usual “Intro to CPI” mini-course and everything was fine until I mentioned our CPI insurance company partners. At that point the dealer jumped in.

“We don’t need an insurance company,” he said. “We do it in-house.” 

I asked him to elaborate, and he proudly explained that if one of his customers lacked insurance, he would “be the insurance company,” collecting a hundred dollars a month in return for “taking care” of the customer’s car in the event of an accident.

This dealer’s homegrown insurance program violated a half-dozen state laws, but when I suggested regulatory concerns he told me nope, things were all buttoned up.  His attorney had blessed the idea.

I asked, did his attorney practice in the field of insurance regulatory law, suspecting I already knew the answer.  The attorney did not, but he was, according to his client, “a really smart guy.”

This brings us back to the Dunning-Kruger Effect.  It does not spare smart people. To quote the good people at Psychology Today, “Even smart people can be affected by the Dunning-Kruger Effect because having intelligence is not the same thing as learning and developing a specific skill. Many individuals mistakenly believe that their experience and skills in one area are transferable to another.” (https://www.psychologytoday.com/us/basics/dunning-kruger-effect). 

The attorney didn’t know what he didn’t know, and neither did the dealer. About a year after that phone call I learned that the “in-house” insurance program was flagged during an exam.  

Three decades on, Lee’s caution, “I need you to know what you don’t know,” still the best advice I’ve ever received.  The line between expertise and ignorance is an unmarked border beyond which luck replaces skill as the coin of the realm.  The ability to see the border and to avoid crossing it accidentally is among the most valuable of professional skills, even more so for those of us who make our living advising others. 

So my advice, not surprisingly, is this: Know what you don’t know in your own business and make sure your advisors know what they don’t know in theirs. Extend your trust sparingly and remember the Dunning-Kruger Effect. An expert in one field can be a confident ignoramus in another.