I love to watch Judge Judy. She's an experienced, intelligent clinician who applies her craft with ruthless efficiency. She's also a classic example of someone who makes systemic thinking errors.

Judge Judy has written four books including one called "Don't Pee On My Leg and Tell Me It's Raining." She doesn't allow anyone to put anything over on her, and after more than thirty years as a prosecutor and family court judge, she's heard it all before. And that's just the problem. Every case is different. Yet as you frequently see, Judge Judy often displays contempt for the plaintiff or defendant even before the person has given their argument.

She exemplifies a classic case of overconfidence combined with "the curse of knowledge." The curse of knowledge occurs when we know a field so well, we assume we already understand the minor details. Knowledge is good, but remember it comes to us "inextricably packaged as concepts and perceptions,"as Edward De Bono says in his book "I Am Right You Are Wrong." In other words, prior knowledge can limit our ability to see new solutions. In Judge Judy's case, it sometimes limits her ability to apply the law in the most equitable way.

Portfolio managers often suffer from the curse of knowledge too. Sometimes they know a company so well they're literally stunned when its price collapses. Think about Lehman, Bear Stearns, Bank America, or Enron.

Another good thing about naked strategies in the stock market is that you don't need encyclopedic knowledge of a stock to buy it. Thus, you avoid the inherent risks of the curse of knowledge.