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The Point Where Knowledge and Ignorance Meet

I was having a conversation with my wife about the explosion of knowledge, when I heard
myself say -- “Just because we are more knowledgeable doesn’t mean we are less ignorant.”
While it isn’t unusual for me to express thoughts out loud, this one caught my attention
because I deal with knowledgeable experts all the time and I am supposed to be one myself.

To connect the dots, I looked to Daniel Kahneman’s new book (Noise: A Flaw in Human
Judgment), in which he explains that objective ignorance stems from “…intractable uncertainty
(what cannot possibly be known) and imperfect information (what could be known but isn’t).
And as theoretical physicist John Wheeler counterintuitively informs us, ignorance is growing
because “We live on an island surrounded by a sea of ignorance. As our island of knowledge
grows, so does the shore of our ignorance.” However, Kahneman says the real problem isn’t
ignorance, it is that experts “…underestimate their objective ignorance.” They are strikingly
oblivious to their limitations, which affects not only their “…ability to predict events but even
their ability to understand them.” So, when it comes to political or financial events, where we
really need to know what to do, the answers from the “…experts are stunningly unimpressive.”

My qualifier about “political and financial events” is important here because objective
ignorance has qualifiers. The reliability of expert judgment has everything to do with the
environment in which an expert is operating. In what Kahneman calls high validity
environments there is regularity, so cues and patterns can be learned. He gives examples of
physicians, nurses, athletes, and firefighters as experts in “…complex but fundamentally orderly
(high validity) situations.” On the other, he notes that political and financial environments have
such low validity that he refers to them as “wicked” – noisy environments with lots of random
variables. In such environments the limits on expert judgment “…is set not by the cognitive
limitation of forecasters but by their intractable objective ignorance of the future.”

Admitting that the future is unpredictable, Kahneman asserts, “…might seem to be stating the
obvious… However, the obviousness of this fact is matched only by the regularity with which it
is ignored…” The reason for the blindness is that experts (as do the rest of us) trust their
intuition, when “…the facts deny them the sense of understanding they crave.” Interestingly,
the experts with the clearest theories of “…how the world works were the most confident and
the least accurate.” So, it appears that the cautionary advice of poet Alexander Pope is as
pertinent today as it was 300 years ago – “Be sure yourself and your own reach to know, How
far your genius, taste, and learning go; Launch not beyond your depth, but be discreet, And
mark that point where sense and dullness meet.” Ruminating on this, I realized that knowledge
without humility leads to overconfidence, increasing ignorance instead of decreasing it.

In the “wicked” world of finance, where a noisy environment conspires with confidence to
make even the best experts ignorant of their ignorance, it is important to be humble and admit
mistakes. As scholar C. S. Lewis advises, “If you’re on the wrong road, progress means doing an
about-turn and walking back to the right road.” And that is why when I know I am on the right
road, I consider I could be wrong because confidence is a feeling that stems from both
knowledge and ignorance, but you never know the point where one ends and the other begins.