The Danger of Being Certain: A New Year’s Lesson from Psychology
As we turn the calendar to a new year, many of us feel a renewed sense of confidence. Fresh goals. Fresh plans. Fresh predictions about what lies ahead. Confidence, of course, is not a bad thing. However, misplaced confidence can be costly, especially when it comes to financial matters.
To illustrate that point, let me take you back about thirty years to Pittsburgh.
One afternoon, a man named MacArthur Wheeler walked into a bank at 2:00 p.m. He wore no mask and carried no weapon. Calmly and confidently, he handed the teller a note demanding cash. An hour later, he repeated the process at a second bank. He did not attempt to avoid security cameras and walked away whistling, seemingly without a care in the world.
By that evening, Wheeler’s face was on the nightly news. He was arrested before midnight.
The story caught the attention of David Dunning, a psychology professor at Cornell, and his graduate student, Justin Kruger. At the time, bank robberies were not unusual; the FBI reported more than 9,000 in 1995 alone. But this one stood out.
Wheeler had no criminal record and no history of mental illness. He was unemployed and desperate, but otherwise ordinary. In preparing for the robbery, he had done “research.” He learned that lemon juice was a key ingredient in invisible ink. From there, he reasoned that lemon juice might also make his face invisible to security cameras.
To test his theory, Wheeler covered his face with lemon juice and took a Polaroid photo of himself. During development, a drop of juice or a stray lemon seed blurred the center of the image, right where his face should have been. To him, this was proof. When police arrested him later that night, he reportedly said, stunned, “But I wore the juice!”
That moment became the foundation for what we now call the Dunning–Kruger Effect: a cognitive bias where people with limited knowledge dramatically overestimate their competence. Simply put, when we don’t know much, we often don’t know how much we don’t know.
Once you learn about this effect, you start to see it everywhere, perhaps even in yourself. I certainly do.
Financial markets are a perfect breeding ground for misplaced certainty. We’re flooded with data: economic reports, earnings calls, political headlines, social-media sound bites, and confident predictions delivered in 30-second clips. Too much information can overwhelm us. Too little or poorly understood information can mislead us.
Each week, I receive articles, videos, and links asking, “Is this something we should be paying attention to?” That’s not a complaint; it’s part of the process. Our role as advisors is to filter the noise, test assumptions, and turn uncertainty into disciplined, purposeful action.
Whenever I catch myself thinking, “This can’t miss,” “This time is different,” or “I’m certain I know what’s coming next,” that’s my cue to pause. I may not need more conviction; I probably need more information.
As we start the new year, humility may be one of the most valuable financial tools we have. After all, confidence without understanding can make anyone believe they’re invisible until the cameras prove otherwise.
My Best,
Ryan