Ep 22: Why Ignorance Isn't Bliss: Decoding the Quadrants of Knowledge – Can They Save Your Wealth?

Episode Description

Ever wondered why some people seem to have the 'golden touch' when it comes to building wealth, while others can't catch a break? It's not just luck or timing—it's about knowledge.

👉 In Episode 22 of The Big Bo $how, Big Bo (a.k.a. Jason Blumstein, CFAⓇ) will guide you through:

  • The 4 Quadrants of Knowledge and what they mean for you
  • How to identify and fill gaps in your financial understanding
  • The role of emotional intelligence in wealth-building
  • How a balanced knowledge portfolio can reduce risk
  • Tips and strategies to apply this knowledge right away

✅ Whether you're a newbie or a seasoned wealth-builder, this is for you!

Hope you enjoy the $how!

Episode 22 Key Takeaways:

  • 00:00 An interactive look at one the most impactful lessons I learned in college
  • 03:54 Why ignoring “known unknowns” can crush your wealth-building potential
  • 08:01 How hands-off investing can put your financial independence at risk
  • 09:36 How can you decide which components of your life to outsource?
  • 15:46 What investors who have outlier success do differently
  • 20:13 The costly financial pitfalls that most investors don’t know exist
  • 26:16 Bo Know$: Why the best wealth creators are like NFL quarterbacks 

Episode Transcript

 Welcome to episode 22 of the Big Bo Show. Why ignorance isn't bliss, decoding the quadrants of knowledge. Can they save your wealth? Let me tell you how this show came about. In college, I took a course and it was one of the favorite lessons that I learned in all of college. And it was about the four quadrants of knowledge.

I mean, how many individual learnings from college? Do you remember? For a lesson to stick with me for over 20 years, it had to be pretty impactful. Today, we're going to look at one of the most impactful things I've ever heard in my college classrooms, and how it can help you be more financially secure in your life.

The lesson is called the four quadrants of knowledge. It's a little bit complex, so let's grab a pen and paper if you wish, or mentally get this down in your head. And I want you. to draw a box and I want you to put a line in the middle of the box and down the center of the box vertically and horizontally and in the top I want you to write known and unknown and across the sides I want you to write known and unknown and now you should have four boxes or four quadrants each of these squares represents Each different quadrant of knowledge, quadrant one, which is in the top left square.

These are the known knowns. These are things that we're both aware of and we understand the top right squares, quadrant two, these are the unknown knowns. These are things we understand. But we're not aware of. Quadrant 3, the bottom left, the known unknowns. These are things that we're aware of, but we do not understand.

And quadrant 4 is the unknown unknowns. These are things that we're not even sure we even know. We're not aware of and we do not understand. The old phrase in life says that ignorance is bliss. And for small things in life, that may be true. But in many areas of life, ignorance is not bliss. Whether it be your health, ignorance is not bliss.

Legal matters, ignorance is not bliss. And of course, with your finances, ignorance is not bliss. With life's most important variables, your health, your safety, and your finances, that third and fourth quadrants of knowledge can be the difference between massive success. and failure. And in episode 22 of The Big Bo Show, we are going to go over these four quasms of knowledge and how you can use them in your journey to create more sustainable wealth.

So sit back, relax, and welcome to episode 22 of The Big Bo Show.

All right, let's get after it. Episode 22 of the Big Bo Show. Ignorance isn't bliss decoding the four quadrants of knowledge. Let's dive in. Often I hear the common refrain in the finance world when I'm talking to people that, well, I don't need help from a welfare budget. I can just do it myself. I can buy some index funds and just do it on my own.

And of course I have my takes on this. Maybe some of them are self service. But again, I always like to look at the numbers as I tell people all the time numbers don't lie People do and as I've talked about a lot and I've talked about on this show the numbers in this country show That people cannot do it on their own It's just like when you go to a doctor or you have a legal matter sure You can maybe Google something or Take the advice that's generally out there, but is it the right advice for you?

Well, the numbers in our country show that statistically speaking people are not generating sustainable long term wealth So let's dive into some of these points on why the four quadrants of knowledge are getting in your way many investors believe That buying and holding index funds is the secret to financial success.

And to be clear, I don't necessarily have a problem with this approach. See, if you've listened to the podcast before, you know I'm a huge fan of Warren Buffett and Charlie Munger. I read my first book on Warren Buffett when I was 14, and I fell in love with him and Charlie Munger's way of life and way of being.

Their investment philosophy, while it's maybe a little bit more complex than simply buying and holding index fund, but the central belief of keeping it simple on your investments is, in my opinion, a good rule of thumb and advice for a lot of people. For many investors, this idea of buying and holding index funds falls into quadrant A.

One the known knowns. Well, I know I need to invest and I know you there's index funds You're aware of this you the known knowns and you understand what it takes to invest based on this simple Known known in quadrant one, but the philosophy is simply buying and holding index funds ignores the other three quadrants most buy and hold investors know there are strategies that can help them and Optimize their taxes, for example.

Some tax planning on their investments. But they're not sure how to do this. Simply buying and holding index funds will not allow you to optimize your tax burden. That falls into Quadrant 3. Well, I know there's ways to potentially optimize my tax burden, but I don't know how to effectively do this. Most investors are also broadly aware of the idea of things like rebalancing, different sectors of investing, large caps, small caps, energy, financials.

Different nuance approach, equity, bonds. Well, I know about this, but I'm not really sure what this all means. I've seen countless people's portfolios and they come to me and say, Well, yeah, I just buy this and buy these index funds or buy that because that's what I know I'm supposed to be doing. And most of the time, the vast majority of the time, I point things out to people.

Well, yeah, you're, you're, you're close, you're getting there. But here's the things we can do. To get things better and it's not their fault. They don't understand it. They didn't learn this and I'll go into an example of this in The next section as well. All of these examples though fall into quadrant 3 the known Unknowns you're aware of them on some level, but you may not fully appreciate or understand the implications and the nuances Of them, but this doesn't mean that they're critically important.

For example, going back to rebalancing. Well, everyone knows. Okay Yeah, I need to know how to rebalance my portfolio. So If you're in a portfolio, that's for example 60 percent equities and 40 percent fixed income just giving this broad example and you hold that portfolio for 30 to 40 years Odds are since equities typically outperform fixed income in the long term Odds are your portfolio is probably closer to let's just say 80 percent equities, 20 percent fixed income.

And now you're at the point where you've been working hard your whole life. You've hit that financial independence. Okay, great. I'm ready to retire. I'm ready to live off my investments. And then that next year, the market goes down. Equities go down, let's just say 20 to 40%, but now. Instead of 40 percent of your portfolio being more stable in a, in a fixed income type of allocation, 80 percent was there.

80 percent was in equities. You thought you had 60 and now you've just made a mistake because you were not sure of how to properly rebalance your portfolio. Very simple example here. This is a very simple example. But I wanted to show you about how, yeah, you have the known, known of, yeah, I need to invest.

Yeah, I can just buy some index ones. Yeah, I think I understand rebalancing. I've heard of it. Well, this is quadrant three. You got to do it, but you didn't necessarily know how to do it. So you neglected it. And now this potentially hurt you. And this segues into the next point I want to make. Once you hit quadrant three, you should think about outsourcing.

And I do this all the time in my life. I've talked about this before with people. I am the least handy person you will ever meet. I'll give you an example that literally just happened. I need to put up a deer fence. There's a lot of deer in my neighborhood. They come, they come to my lawn, they come to my neighbors.

Lawn, they eat my neighbor's flowers. He's like, Jason, it'd be nice if we all just put up a deer fence just to keep them a little bit out of our lawn. Sure, being a nice neighbor. Okay, great. Now, I'm a big guy. I probably could have put up that deer fence myself. I know I need to put up a deer fence. I'm not necessarily sure how to do it.

So, I got the equipment from people that knew about it better and I hired someone to put Uh, the fence and of course he knew how to do it better. He do it, did it quicker than me and he also brought up some quadrant four, some unknown unknowns of how to put the deer fence up better and stronger than I would have.

So let's step away a little bit from this personal example and away from finance. Look at your physical health as well. It's about you, your physical health. In this example, quadrant one and two. Are again, no knowns and unknown knowns. With your health, quadrant one includes things like a balanced diet.

You know you're supposed to eat fruits, vegetables, protein, and limit bad things like alcohol. You know you're supposed to exercise. You know you're supposed to drink enough water and get enough sleep. Quadrant two are things like genetic factors. We don't know why some people are predisposed to being overweight or skinny.

Why George Burns can smoke a cigar every single day and live till he's 100. And some people have addictive personalities and some don't. But we know it has a lot to do with genetics. Then we hit quadrant 3. These are known unknowns, which is again where things get risky. We know it's bad for us, but did you know that a single 20 ounce bottle of Gatorade contains nearly the entire daily recommended sugar intake for an adult male?

Gatorade is marketed as a healthy sports drink. Believe me, when I played sports, I would drink Gatorade all the time. And I would also drink it when I wasn't playing sports. But its sugar levels can put you in a significantly increased risk for health issues like obesity or heart disease. In fact, if you ate a perfectly balanced three meals a day with each ideal ratio of nutrients, but drank two Gatorades a day, you'd be nearly doubling your CDC recommended sugar intake.

Which could lead to significant health issues down the road. So let's talk about Quadrant 4. In Quadrant 4, you have unknown unknowns. And again, I'm going to stay in the health area. We can look at serious diseases like cancer. Recently, I read an article about an experimental cancer treatment conducted at Sloan Kettering.

And let me read you an excerpt from this article. A tiny group of people with rectal cancer Just experience something of a scientific miracle. Their cancer simply vanished after experimental treatment. In a very small trial done by doctors at New York's Memorial Sloan Kettering Cancer Center, patients took a drug called distalumab for six hours.

Months the trial resulting in every single one of their tumors Disappearing the trial glue group included just 18 people and there's still more to be learned about how the treatment worked But some scientists say these kinds of results have never been seen in the history of cancer research Now, of course, this isn't a guarantee of a hundred percent success rate Treating cancer in the future, but of those 18 patients their lives were saved because of something in quadrant 4 The unknown unknowns that only expert doctors could have introduced them to In my opinion, quadrant 3 is where you should think about outsourcing To a professional by outsourcing key areas of your life like financial and physical health to someone who's highly knowledgeable They'll introduce you to areas of things.

You didn't even know that you didn't even know quadrant 4 and Quadrant 3 and 4 are the areas that should propel you forward now I'm gonna take a quick break But when we get back, I'm gonna dive into quadrant 3 and 4 in more detail. We'll be right back

All right. Welcome back. Let's get after quadrants three and four and how it relates to the world of finance and your finances. On your path to building long term sustainable wealth. You see in finance, if you want to take the cheapest approach, something like buying and holding index funds, for example, or DIYing your finances, you won't have any exposure to quadrants 3 or 4, which are the quadrants that separate the herd.

from those who can make life changing strides through their financial plans and their financial lives. When you pay for something cheap, you typically get what you pay for. I've always subscribed to belief that cost is only an issue in the absence of any value. If you pay an advisor 10, 000 a year, but they can help you save 20, 000, for example, on your taxes or cut 30, 000 of unnecessary items out of your budget or create 40, 000 or more a year on your investments versus what Do you really care about the cost that you're spending for this advisor that's going to take you into Quadrants If you only pay for the cheapest expertise, you may miss out on Quadrants 3 and 4 entirely.

Which means you'll keep on getting your costs low, but receiving almost no value whatsoever. In investing and creating wealth, quadrant 3 includes things like emotional responses to market volatility, or inflation risks, things that We're seeing currently as we speak, you may believe that you're emotionally prepared to stick with your plan when the market goes through a bad period, but what is the reality from experience that I saw during the beginning of COVID 19 panic, the S and P 500 fell.

About 30 percent up till March 23rd and people were panicking, selling, chaos. That's what's causing this chaos. That's what's causing the down 30 percent is panic. But by August of that same year, it was back to the old highs. The market was back to its old highs and the S& P 500 that year Closed up 18 percent for the year.

Across the country, I'm sure there are thousands of investors who thought they could stomach that volatility until it happened. As Mike Tyson says, we all have a plan until we get punched in the face. And what happened, what are some of the things that... I saw happening and people calling in sheer panic.

People will pull out of the market only to watch it rebound and costing them potentially hundreds of thousands of dollars, if not millions, over the long term. And now they have regret that they didn't get back in. So now they have this double edged sword. They're upset that they sold. Now they're so upset that they won't even get in, which is affecting...

They're future again having someone along your side someone that sits next to you that has your back That can talk to you about your needs and your reactions that takes the emotional response away is Priceless in my opinion now, let's talk about inflation risk Everyone's been talking about inflation over the past couple years.

You're aware that it's a problem But what have you done about it? There's people that are keeping their money, that have a lot of money, sitting in a bank account, that's still earning them zero. Well, if you've been doing that over the past year and a half, when you've seen inflation go up, your purchasing power has been eroded by over 10%, the level of inflation.

Because of the lack of a plan, the lack of insight, the lack of knowledge, the lack of the known unknowns and the unknown unknowns in quadrants three and four. Would you be willing to pay someone 1%, one and a half percent a year to avoid that loss of that constant loss in purchasing power, which over the past year and a half has been over 10%?

Think about that for a second. Now let's move to quadrant four. Quadrant four includes things like changes in tax legislation, in tax planning. These are the unknown unknowns. Who thinks about these things? There's things that you don't even know that you don't even know. You don't even have the capacity to ask.

Tax changes seem to be happening non stop. It's your financial professional's job to be aware of these changes and how they affect you. You, but those who do it themselves are likely to never be aware of these changes to the tax code and work with your CPA on tax planning items that affect you specifically.

Another common issue in quadrant four, the unknown unknowns are things like work benefits, RSUs, what type of health plan are you taking out? Can you use an HSA? College planning. How does that affect you? What are ways that you can negotiate with the college once your child gets in? Should you be putting money away for the college for your child if you're neglecting yourself?

Also, what's going on a lot right now that I'm seeing is understanding if buying or renting or even renovating your home makes financial sense for you. These are all unknown unknowns that if you work with someone and they understand your total picture they should be pointing these things out to you and having these conversations that make sense for you.

Now let me give an example for you where it just recently happened to me. And even, this is how I came up with coming up with this episode for a podcast. See, I have this friend, I'll call him a friend, is, I've met him through work and he understands the world of music. He is a professional guitar player.

And he has an ear for music and for sound. And he's listened to a couple of my podcasts. And he called me up one day and he said, pretty bluntly, Your sound isn't good, your sound on your podcast just isn't good. And I was like, I was like, what are you saying? Like, I I've heard that before, mainly from people in the music industry that have listened to my podcast that understand sound, they've all said that.

But honestly, I have no clue what you're talking about. It's not like I'm trying to make the sound of my podcast, not good. I have no clue what I don't know. Quadrant four, the unknown unknowns. And when I said this to him, he's like, Oh, like I didn't necessarily realize that you didn't know this. And he pointed out, well get this microphone, do this, do that.

And he sat with me for an hour. Once I got the new microphone. About how to make the sound better. This is all Quadrant 4. He's a person that understands sound. Who understands music. And how understands how to make the podcast sound great. I didn't understand any of this. All Quadrant 4. Unknown unknowns.

Which to him was simple fixes. But to me, I didn't know what I was doing wrong. And this also relates... To finances, there's many things in quadrant four, the unknown unknowns, that if you're working with a competent professional that has your back, that stands next to you and see things in your life, they should be pointing out things from quadrant four, the unknowns unknowns.

That you don't even have the capacity to ask. It's not your fault. You just don't know. You were not skilled or learned in this area. You have a different area of expertise. See, in life, risk by definition is what you don't see coming. No one has the power to predict the future. They can design your portfolio and total financial picture in such a way that when these future risks hit, You don't have to panic because you've planned for it and you have someone by your side that understands the risks and also the opportunities better than you do.

In the end, you can try to do anything yourself even if you're not an expert. You can try to take the things you don't know and move them into the things that you do know and maybe you'll scratch the surface and maybe you'll do it incrementally better. But to make real life changing strides, you need to master quadrants 3 and 4.

And we all have a lot going on in our lives. To spend the time and energy to absolutely master, which, in books that I've read, it says you need 10, 000. 10, 000 hours of studying something. To be considered an expert. 10, 000 hours. Do we really have an extra 10, 000 hours at this stage in our lives? With family, with kids, with business?

To become a master? The best way to do this, in my opinion, instead of spending that 10, 000 hours, is to find someone that has already mastered it for you. So let's take another quick break and then we're going to get back to a bow nose segment and talk about how this all relates to my boy Tua Tagovailoa and my five in one Miami Dolphins.

All right, let's get after everyone's favorite segment of the Big Bo Show, Bo Knows, where I relate my passions in food, football, and finance, and make things relatable. And we all know my favorite passion. One of my biggest passions is football and specifically my Miami Dolphins. So how does this all relate to the four quadrants of knowledge that we were just talking about?

Let me tell you, few things are better than sports at highlighting the need for expertise in the four quadrants of knowledge. So let's just imagine you're an NFL quarterback. And in this case. To a tag of a loa, but you can pick your favorite team or your favorite team's coach, or your favorite player. So let's get into quadrant one, the known knowns.

These are things that you see on paper. These are things like the schedule and the team's rosters. You know the players, you know their schedule. These are known knowns. Then we get into quadrant two, the unknown knowns. These include things like your opponent strategy. You know they'll have one, but you don't know what it will be.

But as you prepare for the game, you want to figure it out to the best of your ability. So let's pause right here. You know who you're going to play, you know what players they have, and maybe a little bit about their strategy. So do you just go out there with the information and play the game each week?

No, no way. What do you do? You watch films. You study. You turn to your massive staff to help you have your time to help become an expert. Outsourcing. Not just your head coach. but your offense and defensive coordinators, your position coaches, your team's assistants, your scout team, your video coordinators, and all the other sorts of experts that you're going to export your need to understand and obtain knowledge from to reveal these quadrants of 3 and 4 to you.

Now, after you do this, by the time the game rolls around, you're better prepared. You're more aware of the ins and outs of your opponent's defensive strategy. You're aware of the tendencies that, that rookie cornerback that you haven't played against does. You're aware of your own tendencies that you need to get better.

People are pointing things out to you about yourself because they have an objective viewpoint. You understand what your opponent is most likely to do on third and eight and second and four. Are they going to blitz? Are they not going to blitz? These are all things that you're not aware of before. But now you have learned because you have deferred this expertise to others.

You've asked others for help. You've brought others. into your team to make you better. And now when you go into the game on Sunday, you're better prepared to have success. And we can see this in Tua Tagovailoa

and what he's been doing starting last year. But even more so, you can see it This year, and how my Dolphins jumped out to 5 and 1. And don't forget, couple episodes, I predicted my Miami Dolphins will make it to the Super Bowl. Every elite performer understands the importance. Of coaching and investing in creating long-term sustainable wealth.

It's no different. You can get to a baseline level on your own, but if you want to really reap the benefits and reap your ceilings, you should consider reaching out to a coach of your own. And again, I'll relate this to Tua. He had a coach when he first started, Brian Flores. Brian Flores was a defensive minded coach.

He wasn't what Tua Tagovailoa needed and everyone was debating. Is it Brian Flores? He got fired. Why did he get fired? Was it Tua? Is it his fault? Is it Tua's fault? And now we can see where the expertise came in Mike Daniels. Mike Daniels is that quadrant three and four guru for Tua Tagovailoa. You can see the results.

So I'll ask you who is your quadrant three and four guru to help propel your financial life. So let's wrap this up. Episode 22 of the Big Bo Show, decoding the quadrants of knowledge. Can they save your wealth? We've talked about the known knowns, the unknown knowns, the known unknowns, and the unknown unknowns in quadrants three and four to protect your blind spots.

And being a former offensive lineman when I played football, I know a thing or two about protecting people's blind spots. So, I will end this episode as I end every episode. To always live a life of integrity. To live a life of obtaining as much knowledge as you can. Quadrant 3 and 4 knowledge. And always live a life that you're passionate about.

So if you need help, or if you learned anything from the show, or just if you want to chat, please reach out to us at Julius Wealth Advisors, 201-289-9181 or info@juliuswealthadvisors.com . Until next time, I wish you all the best in your pursuit of integrity, knowledge, and passion.



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