Volume 1 / Issue 15/ October 10, 2016
Guest Editorial: Why it's OK to say "I don't know."
We are pleased to have a guest editor with us in this issue, and it’s Jim Semple. Jim is the retired Manufacturing Vice President of one of the most advanced engineered products firms in Canada. He is a well-known manufacturing leader, an advocate of Lean, who always had a vision for his teams which produced outstanding engineered equipment for global customers. Jim now lives in Kaleden, BC. Contact Jim at firstname.lastname@example.org
Why It’s OK to say “I don’t know.”
“Knowing what you don’t know is more useful than being brilliant.”
Our need to appear ‘in the know’ is universal, but if we are not careful it can take us down a path of false assumptions and mistaken conclusions. Listen to conversations in your local bar or coffee shop and you’ll hear confident justifications for stupid behavior. Egotism and hubris are the culprits. They lead us to believe we know more than we do. We seldom hear people say, “I don’t know”. Not knowing is a sign of weakness. On the other hand, appearing to know the right answer enables us to maintain a façade of knowing, even when we are well outside our area of expertise.
The need to demonstrate what we know can lead to risky behavior, and disaster may not be far behind. A decision to buy a stock because of a ‘hot’ tip from a ‘smart’ friend or broker, or because of a ‘brilliant’ hunch, is an example. Playing poker, and increasing your bet because you just know the next card will be a seven, is another. How many people spend their year end bonus before they get it, and then are shocked to find it is less than they ‘knew’ it was going to be?
Sometimes the best answer is “I don’t know”. Sometimes the best action is no action. Saying “I don’t know” is akin to applying the brake instead of racing through an intersection when the light turns to amber. Applying the principle to investing, Charlie Munger wrote, “It’s remarkable how much long term advantage people like us (Berkshire Hathaway) have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”. Writing about Munger’s investing style in his recently published book, Charlie Munger: The Complete Investor, Tren Griffin wrote, “Value investing is not about showboating or flouting one’s intelligence. Instead it is about doing things that are not likely to result in a mistake”.
With the recent decline in the stock market it is tempting for stock holders to predict what is coming next and to take action in an attempt to prevent losses. However, you can bet that experienced investors like Warren Buffet and Charlie Munger, with their tradition of taking the long-term view, are sitting tight. If they were asked, “What is going to happen next?”, they would answer, “I don’t know.” As the opening quote by Charlie Munger says, “Knowing what you don’t know is more useful than being brilliant.”