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The Dunning-Kruger-Effect in Web3

By Dominic Klopsch – Co-Founder TIVAN Consulting

„Why the loudest are probably not the smartest“

The graph you see could be the floor-price development of yet another NFT-collection but it’s not – it’s the graph for the Dunning-Kruger-Effect.

? The Dunning-Kruger-Effect describes a so-called „hypothetical cognitive bias“: It states that people with low competence are very confident in their abilities, while at the same time, people with high competence doubt their abilities.
When you dive into a certain topic, at the beginning of your endeavor you actually have very little knowledge but you feel super-confident in yourself and your knowledge. This is the peak of „Mount Stupid“. If you move further with gaining knowledge, you fall into the „Valley of Despair“ which is where most people quit when learning a new skill. However, if you manage to keep on learning, you eventually move towards the „Slope of Enlightenment“ until you can start to specialize and develop niche knowledge. 

? So basically, people that know the least are often the loudest, which results in our perception of real skill to be somewhat distorted. 

When you work in a field like consulting this effect is even more visible and often used to make good business: Think about juniors doing desk research for a week and then being presented as the experts – they often believe themselves they are experts (been there, done that). 

If you combine that with a rather new field like Web3 and NFT, this becomes even more relevant:
❗There are more uncertainties than certainties, everything is developing rapidly and what you thought 2 months ago was a fact might become fiction shortly afterwards.

Dunning-Kruger in Web

This results in the Web3-space being prone to the Dunning-Kruger-Effect because of two reasons: 
1️⃣ This topic is very young and many of the groundworks, infrastructure and basic principles are defined, built and re-defined as we speak
2️⃣ People that engage in this space are also very new and therefore whenever they dive into a certain niche-topic, e.g. a #DAO, you have to consider that there is only very basic knowledge existing generally. 

Take Zeneca (whom I hugely respect): He created his Twitter in March 2021 and started his Newsletter only in June 2021. Now, he is one of the most trusted and accepted voices in this space. Now don’t get me wrong, I’m not saying he was the loudest while at the same time knowing the least! What I’m saying is that the fact that it is possible to become one of the most influential people within a certain area within only 18 months just clearly shows how young this field is. 

Key Takeaways

❗So if you want to take one thing away from this: 
Be humble, stay open to new input and keep on learning. Nothing is certain and we consistently have to question our perspective of „the truth“ as the reality changes faster than one might think. 

If you want to learn more, check out the other Insights-Articles!

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