Know What You Know

“I am wiser than this man, for neither of us appears to know anything great and good; but he fancies he knows something, although he knows nothing.”
—Plato

Photo: MarkyBon/Flickr/Creative Commons License

The difference between what you know and what you think you know could mean the difference between a comfy retirement or punching the clock instead. Four studies published together in a June 2013 paper in the Journal of Marketing Research have found that consumers’ subjective knowledge of an investment will outweigh an objective assessment of their understanding.

Craig Fox

The studies, by UCLA Anderson’s Craig Fox, Ho-Su Wu Term Chair in Management, and Associate Professor of Marketing Sanjay Sood, with Liat Hadar, assistant professor of marketing at the Interdisciplinary Center Herzliya, looked at participants’ investment decisions in relation to subjective and objective knowledge.

Sanjay Sood

The studies showed consumers will make safe, but not necessarily the best, investment decisions when they feel they lack sufficient knowledge even if they, in fact, know plenty. On the other hand, participants acted boldly if they felt confident about their knowledge—even if they actually knew relatively little.

Based upon their research, Fox, Sanjay and Hadar recommend financial education must include relevant information and support for higher levels of subjective knowledge for that learning to be effective.

Find the study here.