Which is better: knowledge or experience? I submit that they must both be present and create a condition we call expertise.
The road to expertise is not linear. To be an expert, you must know a great deal, but experience will teach you that there is a great deal you do not know. Experts frequently comment on how much more there is to learn. The requirement is that true experts know where to find what they don’t know and they know generally when they should go looking.
Experts are good at recognizing both problem and opportunity situations even if they do not have a specific answer for it.
I found this graph recently but unfortunately its provenance is unknown. I would appreciate anyone who knows forwarding that information to me. Both for attribution and for further study.
Expert contains some humility. Hazard does not. Everything is more complicated than you think. A big part of growing up is finding that.
Knowing that there are things, even many things, that you do not know is crucial to expertise. Being conscious of the space of things to learn is crucial.
People who think they “know it all” are dangerous. I tend to be cautious around people who are too positive about their knowledge or beliefs. One thing I have learned is that I have not yet seen it all. I expect that there are many more surprises still to come.
By way of recognition look for
- People who specify answers without exploring the question fully.
- People who do not or cannot specify what assumptions are crucial to their “answer”
- People who do not know the range within which their answer is possible.
- People who do not know where in the reasonable range their answer presently is and how it is changing.
For example, if in 1994 I built a financial plan that relied on an 8% rate of return, I may have seemed cautious. Today that same return would be wildly optimistic. What changed? Businesses still make money. The stock market is not going away.
The difference is that interest rates changed because governments, in their wisdom, believed that low interest rates would stimulate growth and we needed that. Probably an illusion because businesses and people alike do not care much how much interest they pay; they care how much more than the interest rate they can earn. Government tinkering reduces their ability to predict and that reduces their bias to invest.
Inflation fell dramatically too. Partly because they changed the way they keep score. That, of course, also reduces faith and thus fewer people invest.
An expert planner would probably talk to you about things like spread over inflation and share of income devoted to saving. A “hazard” planner would likely talk about absolute yield. Probably the one from recent history.
If we assume that you yourself are not an expert, then we can also assume that some amount of expert guidance will help you. That is true for any profession. Lawyer, doctor, engineer, accountant or financial planner. The trick for the client is to know when they are buying “expertise” and not just someone who has noticed some dramatic but inconsequential fact.
Experience and knowledge are a formidable combination. Neither is sufficient on its own. Young practitioners may have better knowledge and weaker understanding of the things that can go wrong. Older practitioners may have lots of understanding but be a little thin on modern techniques and equipment.
To get better results, be aware of those who ask many questions and who listen to you. Notice the ones who can easily say, “I don’t know, but I can find out.” They may provide the best guidance.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. Contact: firstname.lastname@example.org