The Illusion Of Knowledge ⎟ How Loud Opinions Can Mask Limited Understanding

June 12, 2025

We explore how the illusion of knowledge creates terrible decision-making in VC and startups, from Dunning-Kruger effects to briefing culture disasters.

Patric Hellermann

Shub Bhattacharya

The Illusion Of Knowledge ⎟ How Loud Opinions Can Mask Limited Understanding

This Week On Practical Nerds - tl;dr

The Dunning-Kruger effect in contech startups, venture capital and social media amplification

How briefing culture mirrors political decision-making failures

The difference between primary details and filtered information layers

The accountability problem in investment decision-making

How to spot fake expertise versus real knowledge

We've previously discussed the three timeless jobs of successful CEOs, with acquiring primary information being crucial for prime decisions. This article dives deeper into how the absence of primary data creates the illusion of knowledge across the entire investment ecosystem. Read more here: https://www.linkedin.com/pulse/job-contech-ceo-3-timeless-tasks-your-startup-morphs-hellermann-zrpie

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The Dunning-Kruger effect in venture capital and social media amplification

We often see this in venture capital. Someone reads one article about yen carry trades and suddenly they're posting confident takes on macroeconomic policy. Another person attends one AI conference and starts predicting the entire future of artificial intelligence with absolute certainty.

The Dunning-Kruger effect describes people who lack knowledge but also lack the awareness that they lack knowledge. It's a double problem. You don't just make bad decisions because you don't know enough. You make bad decisions because you don't even realize you don't know enough.

Social media makes this infinitely worse. Now you can broadcast your ignorance to thousands of people. Even worse, you can convince half your followers that your ignorance is actually expertise. We call this the externalized Dunning-Kruger effect. You're not just deluding yourself anymore. You're deluding everyone else too.

This tends to happen constantly in our industry. Every major event creates instant experts. COVID made everyone a virologist. The Ukraine war made everyone a defense strategist. ChatGPT made everyone an AI expert. Deep learning breakthroughs made everyone a semiconductor analyst. Tariff discussions made everyone a trade economist.

The problem isn't that people have opinions. The problem seems to be that they present assumptions as facts. They present speculation as knowledge. They present their gut feelings as research-backed conclusions.

There might be ten or twenty people in the world who can successfully project false confidence and make it work through sheer platform size. Think about someone who owns a social media company or runs a major government. For everyone else, embracing the Dunning-Kruger effect is just setting yourself up for terrible decision-making.

Our observation is that most of us don't have that kind of platform. Most of us can't bend reality to match our confident assertions. So we need to stay grounded in what we actually know versus what we think we know.

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How briefing culture mirrors political decision-making failures

Politicians get their information through curated one-page briefings. Each briefing comes from someone lower in the bureaucracy. Each layer adds its own agenda, its own filtering, its own interpretation. By the time information reaches the top, it might contain a tiny kernel of the original truth buried under layers of abstraction and bias.

The concerning part is how similar this appears to be to how many VCs operate. We suspect we're not as different as we think. We rely on the same kind of filtered information chains that create disasters in government.

Here's how it works in practice. Someone calls another VC and asks about a company. "Yeah, they're killing it. Great founder. Amazing traction." The second VC takes this as gospel truth and passes it along to a third person. "I heard they're doing really well. Definitely worth looking at."

Nobody actually looked at the primary data. Nobody talked to actual customers. Nobody examined the real metrics. Everyone just repeated what someone else said, adding their own layer of confidence to secondhand information.

Our observation suggests this happens multiple times daily at VC firms that struggle with decision-making. Larger firms probably experience it more frequently. The bigger the organization, the more layers of abstraction you get between decision-makers and actual facts.

We admire CEOs and investors who constantly find ways to cut through these layers. They still do founder-led sales even after years of scaling. They read raw transcripts from customer conversations. They walk the shop floor and talk directly to the people doing the work.

They understand that you need primary details to make prime decisions. If you don't have access to the original source of information, you shouldn't be making the decision in the first place.

The difference between primary details and filtered information layers

Primary details are the raw, unfiltered facts. Customer conversations. Sales transcripts. Engineering reports. Financial statements. User behavior data. The actual stuff that happened, without interpretation or summary.

Filtered information is everything else. Someone's summary of a customer conversation. Someone's interpretation of a financial report. Someone's opinion about what the data means. The more layers of filtering you add, the further you get from reality.

In our experience, most business decisions appear to get made based on filtered information. Someone writes a brief. Someone else summarizes the brief. A third person presents the summary to the decision-maker. By the time it reaches the person making the call, the original facts have been abstracted into meaninglessness.

This is why great leaders obsess over primary details. They want to see the raw sales transcripts, not the sales summary. They want to talk to actual customers, not read the customer success report. They want to examine the actual code, not hear about the engineering update.

The construction industry offers perfect examples here. Great project managers walk the site every day. They talk directly to the trades. They see the actual work being done. Bad project managers sit in meetings and read status reports that are already three days out of date.

Same principle applies to construction technology startups. If you're building software for contractors, you better be talking to contractors regularly. Not just talking to them once during customer discovery. Talking to them weekly, monthly, constantly. Getting primary details about how they actually use your product versus how you think they use it.

You can't delegate this away. You can't have someone else gather the primary details and summarize them for you. The moment someone else processes the information, it stops being primary. It becomes filtered, interpreted, abstracted.

Why some founders and VCs rely on secondhand opinions instead of firsthand data

The root cause comes down to accountability and ownership. Taking full accountability for your decisions is harder than it sounds. It means you can't blame anyone else for the reasoning behind your choices. All the reasons have to reside within you, your work, your beliefs.

Our observation suggests that most people cope with this difficulty by introducing artificial constraints. They convince themselves they don't have enough time to gather primary information. They tell themselves they need to make decisions quickly, so shortcuts are necessary. They rationalize relying on other people's briefings and summaries.

But if you don't have time to gather primary information, you shouldn't be making the decision at all. Either wait until you can do the work properly, or admit that someone else should be making the call.

The VC industry seems to make this worse by celebrating the wrong behaviors. We appear to put a premium on being loud and confident. We attribute heroic characteristics to whoever speaks most emphatically. Someone who says "I don't know enough to weigh in on this" gets judged harshly. Someone who speaks loudly about topics they don't understand gets seen as adding value.

This appears to create a concerning feedback loop. People seem to get rewarded for projecting false confidence. They get punished for intellectual humility. So naturally, more people start projecting false confidence and fewer people admit when they lack knowledge.

In our observation, the firms that tend to avoid this trap have strong cultures of intellectual honesty. Partners regularly say "I don't know" when they don't know something. They recognize when someone else has more relevant experience or information. They make sure decisions get made by the people best equipped to make them.

This isn't delegation. Delegation is when you assign someone else to do work on your behalf. This is recognition that the decision should belong to someone else entirely because they're better positioned to make it correctly.

The accountability problem in decision-making

Real accountability means you can't attribute your decision to anyone else. No other individual, no external factor, no circumstance beyond your control. The decision and all its reasoning have to come from you.

This is incredibly difficult in practice. It's much easier to point to market conditions, or what other investors are doing, or what advisors recommended. It's much easier to say "everyone thought this was a good idea" than to say "I analyzed the situation and concluded this was the right move."

We see the opposite of accountability when VC firms write investment committee briefs beforehand, share them with committee members, and then have those members show up without reading the briefs. Or worse, when committee members don't even show up for the decision.

This is exactly the briefing culture problem we talked about earlier. People are making investment decisions based on someone else's summary of someone else's analysis of the actual opportunity. Multiple layers of abstraction separate the decision-maker from the primary information.

Employed partners at large firms face particularly bad incentive structures here. Their job security might depend on reporting good news and big outcomes. This creates pressure to influence founders toward fundraising decisions that serve the firm's interests rather than the company's interests.

The solution requires building systems that reward intellectual honesty over false confidence. Firms need to celebrate partners who say "I don't know" when they don't know something. They need to punish partners who speak confidently about topics they haven't researched properly.

Individual investors can start by being brutally honest with themselves about what they actually know versus what they think they know. Before making any significant decision, ask yourself: do I have primary details about this situation, or am I relying on filtered information from other people?

How to spot fake expertise versus real knowledge

Our experience suggests that real experts can often be spotted if you know what to look for. They give specific examples instead of abstract generalizations. They readily admit the limits of their knowledge. They ask detailed follow-up questions to understand your specific situation better.

Fake experts do the opposite. They speak in broad generalities that could apply to almost any situation. They project complete confidence even when asked about edge cases. They pivot to abstract concepts when pressed for specifics.

The easiest way to test someone's expertise is to ask follow-up questions. Real experts can go three or four levels deep into specifics. Fake experts deflect back to generalities after the first follow-up.

Someone would have to literally come up with lies about specific details to fool an observant person for very long. Most fake experts won't go that far. They'll stick to confident-sounding abstractions that can't be easily verified or challenged.

We tend to see this constantly in startup meetings with investors. One investor might stay quiet because they recognize they don't have relevant expertise. Another investor might dominate the conversation with loud, emphatic opinions about topics they don't actually understand.

The founder often seems to mistake the loud investor for the value-adding one. But our observation suggests the quiet investor who asks thoughtful questions and admits their knowledge gaps is usually the one who will actually help the company succeed.

This same pattern shows up in construction technology. Real experts in construction operations can tell you specific stories about how different tools work on different types of projects. They can explain exactly why certain approaches work better in hot weather versus cold weather, or with union crews versus non-union crews.

Fake experts in construction speak in generalities about "improving efficiency" and "leveraging technology" and "streamlining processes." They can't tell you specific stories because they don't have specific experience.

The lesson for founders is simple: be extremely skeptical of anyone who speaks confidently about your industry without demonstrating specific, detailed knowledge of how things actually work in practice.

Conclusion

Our experience suggests that we're drowning in an ocean of loud opinions masquerading as expertise. The loudest voices often seem to know the least, while those with real knowledge tend to stay quiet because they understand the complexity of what they don't know. As founders and investors, our success appears to depend on cutting through layers of filtered briefings to reach primary data. The next time someone presents confident assertions as facts, ask yourself: are they sharing knowledge or just assumptions?

The illusion of knowledge isn't just a VC problem. It appears to be everywhere in business, amplified by social media and rewarded by cultures that seem to mistake volume for value. We seem to have created systems that punish intellectual humility and celebrate false confidence. But our observation is that the companies that win tend to be the ones led by people who obsess over primary details, who admit what they don't know, and who make decisions based on facts rather than filtered opinions. Your business decisions deserve better than secondhand speculation dressed up as wisdom.