Not about everything, mind you, but about buying a franchise.
If you think you can perform due diligence that substantially reduces your risk of failure you are Unskilled and Unaware (read the paper to find out).
People tend to hold overly favorable views of their abilities in many social and intellectual domains. The authors suggest that this overestimation occurs, in part, because people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it. [my emphasis}
Okay…so everyone but you, right? Right….
- If you are in an economic relationship to anyone thinking of buying a franchise (ie. spouse, boy/girlfriend, mother, father, brother etc.) you, by proxy, are also an idiot.
But that’s okay: I’m an idiot too. And it seems recent psychological research suggests many others have problems making rational decisions.
I was a franchisee and have learned why due diligence will not prevent the cancer of franchisor opportunism (definition: franchisors using their discretion within their contract to strip value from a “trapped” franchise.) Franchisees are trapped because they cannot get their investments out without losing almost all its value (sunk costs).
Kruger, Justin and Dunning, David, “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments”, Journal of Personality and Social Psychology, 1999, Vol 77, No. 6, 1121-1134, Free download from apa.org