This article originally published in The Northern Daily Leader on 14 April 2012.

There are many ways that you might try and rob a bank. Perhaps you would think to hide in one of the offices until the bank closed, giving you an opportunity to try and crack the safe. Maybe you would just lunge across the counter and make off with whatever you managed to grab out of the cash drawer. If you had the time perhaps you would try tunnelling into the bank from underground, an event which seems to happen quite frequently in movie-land. You might think to do it simply with some forged cheques, hoping to make it to exile in Brazil before the AFP caught up with you at the airport.

McArthur Wheeler is one person who should have thought a bit harder about the various ways to rob a bank. In 1995 he walked into two Pittsburgh banks in broad daylight and robbed them at gunpoint, making no visible attempt to disguise himself. He was arrested a few hours later after CCTV footage of him was released to the local news. When police showed him the footage, he was surprised and mumbled “But I wore the juice”. Apparently Wheeler was under the impression that rubbing lemon juice on your face rendered it invisible to CCTV cameras. Clearly, he was wrong (too much reliance on Google perhaps?).

The story of Wheeler comes at the start of an excellent research paper from two researchers at Cornell University. In the paper, the authors considered the issue of incompetence, hence the short story of McArthur Wheeler and his not-so-clever crime spree. In what has become called the ‘Dunning-Kruger effect’, in honour of the two authors, they found that incompetent people can be so incompetent that they don’t even realise they are incompetent. To put it more simply, sometimes we’re not only stupid, but we’re so stupid we don’t even realise how stupid we really are. Even Charles Darwin knew this, writing in 1871 that “ignorance more frequently begets confidence than does knowledge”.

So what does the Dunning-Kruger effect have to do with finance or investing? The problem is that our confidence in our ability to make rational and appropriate investment decisions is often misplaced. We may think we know what we are doing, but in reality we are deluding ourselves and should let somebody who really knows what they’re doing make the decisions for us. But according to the Dunning-Kruger effect, we’re too dumb to even realise this and so we carry on making the wrong decisions. So be honest and ask yourself if you need expert help. And if you think lemon juice really does make you invisible, you definitely need some help.