The Curse of Knowledge

Our judgments can often be impaired by our existing knowledge. The curse of knowledge is the biased effect that our existing knowledge has on our ability to consider other people’s perspective. In other words, more knowledge is not always better, and it may be especially harmful when you want to understand other’s perspective.

The Curse of Knowledge in Economic Settings

Research shows that people often can’t ignore their existing knowledge even when it is in their best interest to do so. For instance, let’s say that you have some information about a company stock that potential buyers don’t have. So naturally, when you anticipate what decisions such potential buyers are likely to make, you should disregard the private information.

Studies show, however, that people are unable to disregard such knowledge even when it is in their best interest to do so. Moreover, as a 1989 study by Colin Camerer, George Loewenstein, and Martin Weber found, even financial incentives don’t cure this bias.[1] Market forces also do not remove this bias, although they can reduce it almost in half, and that depends mostly on how rational are other traders.

Takeaway

One of the simplest ways to guard against the curse of knowledge is to consult people who lack the same knowledge as you do. If their predictions or judgments differ noticeably from yours, you may suspect that you’re being cursed by your existing knowledge.

Notes

[1] Colin Camerer, George Loewenstein, and Martin Weber, The Curse of Knowledge in Economic Settings: An Experimental Analysis, The Journal of Political Economy, 97, 1232-1254 (1989).