The Dunning-Kruger effect is not well established. It often doesn't reproduce.
Also the effect isn't that people misjudge their knowledge, it's that they misjudge their place within a distribution. Suppose I give an exam to 30 people, and the results are normally distributed around a score of 70 with a low of 40 and a high of 97. The bottom of the distribution may accurately predict that they scored about 40 on the exam, but if you ask them how they performed relative to their peers, they will believe that they are about average and guess that a sizable portion of the class performed worse than them. Alternatively, if you ask the top performer who scored a 97, they will say that they think they scored about 97, but they will think maybe a few other people scored higher and maybe that the average was in the high 80s. The Dunning-Kruger effect posits that people are actually pretty good at accessing their own knowledge without being a good judge of how knowledgeable others are.
>Also the effect isn't that people misjudge their knowledge, it's that they misjudge their place within a distribution.
Put differently, isn’t this saying it’s a misattribution of confidence? In the context of the original claim about investing, that seems very relevant.
Also the effect isn't that people misjudge their knowledge, it's that they misjudge their place within a distribution. Suppose I give an exam to 30 people, and the results are normally distributed around a score of 70 with a low of 40 and a high of 97. The bottom of the distribution may accurately predict that they scored about 40 on the exam, but if you ask them how they performed relative to their peers, they will believe that they are about average and guess that a sizable portion of the class performed worse than them. Alternatively, if you ask the top performer who scored a 97, they will say that they think they scored about 97, but they will think maybe a few other people scored higher and maybe that the average was in the high 80s. The Dunning-Kruger effect posits that people are actually pretty good at accessing their own knowledge without being a good judge of how knowledgeable others are.