1. We may initially use the poor planning of others to validate our own poor planning. Our neighbor goes into debt buying a new Hummer, a jet ski, a snowmobile, and a bass boat. They can make the payments on all this junk, but the end result is poverty in retirement, if not bankruptcy and repossession in a few years. However, if all we see is a neighbor with a lot of junk on his lawn, we might get the wrong message: "Hey, he can afford all that crap, I guess I can, too!"
2. We may deny the experience of others applies to us. Our neighbor finally goes belly-up, loses the house, loses the cars and the jet skis and the other crapola and ends up in bankruptcy court. A valuable and powerful lesson, if you are willing to learn from it. Instead, many folks think, "Well, he wasn't very fiscally sound - that could never happen to me! I clip coupons, after all!" The reality is, of course, it hasn't happened yet but refusing to learn doesn't mean it won't.
3. Bad data or no data may make applying indirect experience possible. We see a neighbor struggle with bills and debt and should learn from that experience not to spend so much - or we would, if people were not so secretive and ashamed of how much they make and how much they spend (think about it - people will tell you the most intimate details of their sex lives before they tell you their salary or mortgage payment!). Lack of data (or bad data) is often the largest block to Indirect Experience - and the credit industry is all-too-happy to provide you with misleading data, and is all-too-happy that you may be too ashamed to be up-front about your own bad experiences with others.
1. We learn that hot things can burn us.
2. We know that burning hurts.
3. We know that stoves get hot.
4. Ergo, if you put your hand on a hot stove, you will get burned.