Photo credit: *TONI.R
There are four levels of competence in psychology, definitions extracted from Wikipedia:
Unconscious incompetence
The individual neither understands or knows how to do something, nor recognizes the deficit or has a desire to address it.
Most people are in this state when it comes to investing – ignorance. They do not even know they do not understand anything about investing. By listening to others that stocks can make money, they plunge into the market – but I’m sorry, there is no free lunch in this world.
Conscious incompetence
Though the individual does not understand or know how to do something, he or she does recognize the deficit, without yet addressing it.
I think this is worse than unconscious competence. This is simply laziness. They know that they do not understand investment but still want to get in and make a quick buck – they know there’s no free lunch in this world but still looking for one.
Conscious competence
The individual understands or knows how to do something. However, demonstrating the skill or knowledge requires a great deal of consciousness or concentration.
This is the state of experienced investors and traders who have paid their dues to earn their investment skills and knowledge. It is tough to get here – they enjoy their lunch after paying for it.
Unconscious competence
The individual has had so much practice with a skill that it becomes “second nature” and can be performed easily (often without concentrating too deeply). He or she may or may not be able teach it to others, depending upon how and when it was learned.
Master investors like Warren Buffett and George Soros will be in this state. The competence level is so high that they apply their skills and knowledge without their knowing – they enjoy their lunch without feeling a pinch paying for it.
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