Illusion of Knowledge – The Wild Ass Guess (WAG) in Business: You Don’t Know as Much as You Think You Know…

Joe DePaola, 12/30/13

Illusion of knowledge is the tendency to think that you have a better understanding than you actually do about any topic, issue, concept, problem…

According to Daniel J. Boorstin; greatest obstacle to discovery is not ignorance; it’s the illusion of knowledge… The term illusion refers to a specific form of sensory distortion, and although illusions distort reality they are generally shared by many people…

According to Barber and Odean; the illusion of knowledge is the tendency to make a stronger inference than is warranted by the data…

According to Montier; over-optimism and over-confidence tend to stem from the illusion of control and the illusion of knowledge…

Knowledge is imperative for achieving – success in business, power in politics, celebrity status in society… but, when do you know if you have enough of the right knowledge? According to George Bernard Shaw; beware of false knowledge; it’s more dangerous than ignorance…

According to Dr. Daniel Simons; the tendency to think that we have a better understanding than we actually do, for example; one element of illusion is belief that basic understanding is actually deep understanding, when in fact it might be just superficial…

According to Stephen Hawking; greatest enemy of knowledge is not ignorance, it’s the illusion of knowledge…

In the article Knowledge Can Be Very Dangerous Illusion, Dr. Jeff Hester writes:

Some of what you think that you know is fine, but some isn’t: Here’s the rub – you don’t know which is which! In a rapidly changing high stakes world this simple truth holds the key to your fate… In the business world the data that supports your insights can be compelling, for example; research by Booz & Company found that 80% of the loss of shareholder value is the result of a single cause; mismanagement of strategic risk…

More anecdotally, Jay Goltz writes in The New York Times; it’s simply a matter of denial or of not knowing what you don’t know… it all boils down to the same thing: The pitfalls that are likely to undermine success are failures in knowledge that you should have seen coming!

But first and foremost, a leader’s job is to make the strategic decisions that carry an organization successfully into the future through what are often treacherous waters. But decisions can be no better than the knowledge upon which they are based… Bad knowledge leads to bad decisions, and bad decisions have bad consequences… When disaster strikes it’s usually because someone in charge didn’t recognize that the light at the end of the tunnel was, in fact, the headlight of the oncoming train…

For me, when Stephen Hawking talks about the ‘illusion of knowledge’, that’s far too polite a term for the brutal truth: Let me put it more bluntly… Some of what you think that you know is reliable, but some is nothing more than a ‘wild ass guess’ (WAG)… Your fate depends on your ability to tell which is which. As if the illusion of knowledge weren’t enough, and to make matters worse you hold onto your WAGs with everything you’ve got. You are quick to notice things that seem to confirm your ideas, but you are more than happy to overlook or rationalize away those inconvenient indications that you might be wrong. I’m not being judgmental, but ‘bias’ and ‘illusion of knowledge’ are wired into the brain; they are as natural as breathing. In business, four-out-of-five failed businesses are victim to their own WAGs; whether a small entrepreneur or Fortune 500 CEO… WAGs are the worst enemies you’ve got… According to Michael-Don Smith; greatest barrier to innovation and positive change is the illusion of knowledge…

In the article Predicting and Illusion of Knowledge, Daniel Simons writes: One aspect of illusion is that we often mistake surface understanding for deep understanding – we think we have deep understanding when all we really have is knowledge of surface properties. In an op-ed in the Los Angeles Times it argued that the illusion of knowledge when coupled with technology presents information in – short, surface-level bursts, which can lead to a mistaken belief that we actually understand more than we do…

One practical consequence of the illusion of knowledge is the planning fallacy – we almost always assume that new projects will take less time and resources than they actually do. In part, because planning fallacy arises when we fail to take into account all the unpredicted complications that can arise, and we assume the simplest possible scenario. According to Darron Billeter, Ajay Kalra, George Loewenstein; the illusion of knowledge leads us to think that we’re more skilled or knowledgeable than we actually are and it leads us to underestimate how long it will take us to accomplish our goals. According to Billeter et al; in a study of predictions for how long people would take to learn a new skill; people were generally overconfident in their estimates, just as you would expect from overconfidence in your own knowledge. However, as soon as they began to learn the skill, they realized that they couldn’t succeed without more practice; they then over-corrected their expectations and assumed it would take them longer to learn the skill than it actually did…

In the article Do You Know What You Don’t Know? by Art Markman writes:

You probably don’t know as much as you think you do. When put to the test, most people find they can’t explain the workings of everyday things they think they understand... Don’t believe me? Find an object you use daily (e.g., a zipper, a toilet, a stereo speaker…) and try to describe the particulars of how it works. You’re most likely to discover unexpected gaps in your knowledge. In psychology we call this cognitive barrier the illusion of explanatory depth. It means you think you fully understand something that you actually don’t. We see this every day in using ‘buzz words’– though we often use these words– their meanings are usually unclear. They mask gaps in our knowledge serving as placeholders that gloss over concepts that you don’t fully understand… For example, several years ago, I attended a corporate meeting where the vice president spoke about streamlining business practices… During the talk, many executives in the room nodded in agreement. Afterward, though, many of them discussed-questioned what streamlining actually meant. None of the people who had nodded in agreement could exactly define the mechanics of – how to streamline a business practice…

In the article Illusion of Knowledge, Nick Miltonat writes:

The illusion of knowledge is behind the way we over-estimate how much we know… We all experience this sort of illusory knowledge, even for the simplest projects… We underestimate how long they will take or how much they will cost, because what seems simple and straightforward in our mind, but typically turns out to be more complex when our plans encounter reality…

Over and over, the illusion of knowledge convinces us that we have a deep understanding of what a project will entail, when all we really have is a rough and optimistic guess based on shallow familiarity… People think they know what to do, so they never ask for help and they never look for knowledge elsewhere… They think (mistakenly) that they have all the knowledge they need… So how do you deal with this problem? To avoid this illusion of knowledge, seek out other views, and other opinions for a similar circumstance that others have completed (the more similar to yours the better, of course). When you consider other views that differ from your own, it might change how you see your circumstance… Keep in mind, as part of your overall ‘knowledge management’, three illusions; illusion of memory, illusion of confidence, illusion of knowledge…

In the article Why We Make Things Up, Jeff Hester writes: When I speak to business audiences I always start by saying: If you want your business to thrive; ‘illusion of knowledge’ is enemy number one! That accusation begs the question, if the illusion of knowledge is so pernicious, then why do we have it? It’s simple. Without the illusion of knowledge we couldn’t get through the day… I remember my first trip to Asia; even though I had travel extensively this was a new world to me; it was uncomfortable-disorienting… We’ve all found ourselves in situations that we weren’t certain of the circumstances, where we didn’t know the rules. We all know the stress, anxiety and even fear and self-doubt those times can bring… Our experience of the world is inseparable from our conception of the world. I’ll give you an example; look at the following phrase: 你今天好嗎.  I don’t read Chinese so I see nothing but meaningless symbols, but when someone translates its meaning, it’s a pleasant greeting: How are you today? (Or at least that’s what ‘Google Translate’ tells me they see! That brings us back to the illusion of knowledge. We need ‘to know’ about things; because without knowledge and understanding we are worse than lost. We need to understand the world so badly that we will grasp at anything! In process we can fool ourselves, usually without even realizing it. Even when it’s not perfect, our understanding of the world is what lets us make business decisions and move through the day… However, if you want to move beyond the illusion of knowledge, start by identifying the knowledge and ideas that are most critical to the way you do business. Then do your level best to show that they are wrong (yes wrong)… That is what I mean when I say, ‘Never bet the farm on an idea that you haven’t tried to kill first… If your ideas can withstand scrutiny then you can sleep well at night. But if an idea can’t stand the heat, then its better that you find out sooner rather than later…. At least that’s if you want to stay in business…

No one is immune to the illusion of knowledge: Now that’s a scary thought considering that most of us rely on – information, input, ideas… from hundreds of people in our daily lives. For example; yes, your doctor suffers from the illusion of knowledge. Yes, your business management suffers from it. Yes, your stockbroker suffers from the illusion of knowledge too… How do you reduce your exposure from the effects of this illusion? The best way is to do research, listen to multiple sources, get a second opinion or even third or fourth when it comes to business, finances, health… According to Sabine Hossenfelder; we are faced with an incredible amount of information and it’s often necessary to use shortcuts to arrive at a conclusion, fast… these are illusions of knowledge that makes the world much easier when they are classifiable as simply; good and bad, right and wrong, friends and enemies… According to John Hunter; you must be willing to question your beliefs but at the same time you need to make many decisions every day based on your beliefs, and making a huge number of assumptions everyday… But there are risks of assuming you know much more than you do. And that illusion of knowledge is something that makes people much less effective than they could be if they better understood what they knew, and the weight they should give to various beliefs… According to Crystal C. Hall, Lynn Ariss, Alexander Todorov; intuition suggests that having more information can increase prediction accuracy about uncertain outcomes. In experiments, we have shown that more knowledge can actually decrease accuracy and simultaneously increase prediction confidence… Bottom-line: Don’t be over-confident, don’t think that you know it all because you don’t, maintain vigilance in learning… And, just like you shouldn’t assume you know it all, definitely don’t assume that others do either…

http://bizshifts-trends.com/2013/12/30/illusion-knowledge-wild-ass-guess-wag-dont-know-much-think-know/