A Circle of Competence is the set of topic areas that align with a person's expertise.
If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise.
Circle of Competence 101
Warren Buffett and Charlie Munger often reference the importance of knowing the boundaries of your circle of competence.
But what is a Circle of Competence and how does it work?
Here's Circle of Competence 101!
A Circle of Competence is the set of topic areas that align with a person's expertise.
If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise.
"You don’t have to be an expert on every company...you only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital."
It is built through experience, reading, dedicated study, and effort.
It is dynamic, not static.
It can expand as you deepen your knowledge in new areas. It can contract if you fail to nurture your existing areas of expertise.
(1) Identify what falls within your circle
(2) Identify the boundaries of your circle
(1) is all about figuring out what you know, while (2) is about humbly admitting what you don’t.
In investing?
Berkshire Hathaway provides the classic example of investing success from sticking within the boundaries of your Circle of Competence.
At times, it has led to what might look like big misses, including failing to see the potential and invest in Google and Amazon.
As Munger once said, you can become a consistent winner by “trying to be consistently not stupid, instead of trying to be very intelligent."
The best operators know their core competencies and are honest about their incompetencies.
The visionary CEOs hire field general, execution-focused COOs.
The field general CEOs hire visionary product leaders.
Own your competencies, outsource the rest.
First, identify your circle and its boundaries.
What topics do you know more about than most people?
What topics do others look to you on?
What are you constantly excited by and learning more about?
Build checks into your decision process that pressure test whether you are remaining true to your Circle of Competence.
Consistently sticking to your circle will lead to good long-term outcomes.
Embrace intellectual curiosity!
Is there a new topic you are excited about? Read everything you can get your hands on.
We live in an unprecedented era of access to information.
You can seek out thought leaders, ask them questions, read their articles, listen to them speak.
It is truly remarkable. Take advantage!
You may just find that your Circle of Competence begins to grow.
For more, check out the resources below:
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1/ An Allegory of Finance
— Sahil Bloom (@SahilBloom) July 18, 2020
I have been posting a lot of educational (and humorous!) threads on finance, money, and economics.
My mission is simple: to demystify these concepts and make them accessible to everyone.
All of the threads can be found below. Enjoy and please share!
More from Sahil Bloom
THREAD: With #silversqueeze trending on Twitter, it appears that this week's market spectacle may well be in the silver market.
A perfect moment for a thread on the Hunt Brothers and their alleged attempt to corner the silver market...
1/ First, let's set the stage.
The Hunt Brothers - Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt - were the sons of Texas tycoon H.L. Hunt.
H.L. Hunt had amassed a billion-dollar fortune in the oil industry.
He died in 1974 and left that fortune to his family.
2/ After H.L.'s passing, the Hunt Brothers had taken over the family holdings and successfully managed to expand the Hunt empire.
By the late 1970s, the family's fortune was estimated to be ~$5 billion.
In the financial world, the Hunt name was as good as gold (or silver!).
3/ But the 1970s were a turbulent time in America.
Following the oil crisis of the early 1970s, the U.S. had entered a period of stagflation - a dire macroeconomic condition characterized by high inflation, low growth, and high unemployment.
4/ The Hunt Brothers - particularly Nelson Bunker and William Herbert - believed that the inflationary environment would persist and destroy the value of their family's holdings.
To hedge this risk, they turned to silver.
They began buying the metal at ~$3 per ounce in 1973.
A perfect moment for a thread on the Hunt Brothers and their alleged attempt to corner the silver market...
1/ First, let's set the stage.
The Hunt Brothers - Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt - were the sons of Texas tycoon H.L. Hunt.
H.L. Hunt had amassed a billion-dollar fortune in the oil industry.
He died in 1974 and left that fortune to his family.
2/ After H.L.'s passing, the Hunt Brothers had taken over the family holdings and successfully managed to expand the Hunt empire.
By the late 1970s, the family's fortune was estimated to be ~$5 billion.
In the financial world, the Hunt name was as good as gold (or silver!).
3/ But the 1970s were a turbulent time in America.
Following the oil crisis of the early 1970s, the U.S. had entered a period of stagflation - a dire macroeconomic condition characterized by high inflation, low growth, and high unemployment.
Stagflation 101
— Sahil Bloom (@SahilBloom) September 2, 2020
The term "stagflation" is used frequently in discussions of monetary policy and risks in the post-COVID world.
But what is stagflation and how does it work?
Here's Stagflation 101!
\U0001f447\U0001f447\U0001f447 pic.twitter.com/at4FmaCmkM
4/ The Hunt Brothers - particularly Nelson Bunker and William Herbert - believed that the inflationary environment would persist and destroy the value of their family's holdings.
To hedge this risk, they turned to silver.
They began buying the metal at ~$3 per ounce in 1973.
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If you wish to learn abt trading,psychology,options,business etc
You can go through this thread.
Other than this I do post videos on my YT channel : -Abhishek Kar & Tradiostation
-Intraday views on FREE telegram : Abhishek Kar Official
RT will be appreciated
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https://t.co/wabkek43I8
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https://t.co/CsEEhIsD3q
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https://t.co/IjxpX5Wx24
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If you wish to learn abt trading,psychology,options,business etc
You can go through this thread.
Other than this I do post videos on my YT channel : -Abhishek Kar & Tradiostation
-Intraday views on FREE telegram : Abhishek Kar Official
RT will be appreciated
1. Threads to learn Options
https://t.co/wabkek43I8
2. https://t.co/OIDenHKdWN
3. Some core rules to investing
https://t.co/37d1pygp7P
4.Summing up 2020 Trading lessons
https://t.co/jSUb1lSGbQ
5.Effects of margin change on
\U0001d413\U0001d421\U0001d42b\U0001d41e\U0001d41a\U0001d41d \U0001d41f\U0001d428\U0001d42b \U0001d40e\U0001d429\U0001d42d\U0001d422\U0001d428\U0001d427\U0001d42c
— Abhishek Kar (@Abhishekkar_) December 29, 2020
The entire thread will have some quick pointers on options trading. These bullet points are based on experience and learning and even if you are completely new,will help you to build some perspective. So,lets go :
6. Exciting story about a trader who destroyed a Bank
https://t.co/CsEEhIsD3q
7. Some Thought Provoking facts about stock markets
https://t.co/IjxpX5Wx24
8. A dose on Trading and investing
\U0001d413\U0001d42b\U0001d41a\U0001d41d\U0001d41e\U0001d42b \U0001d430\U0001d421\U0001d428 \U0001d41d\U0001d41e\U0001d42c\U0001d42d\U0001d42b\U0001d428\U0001d432\U0001d41e\U0001d41d \U0001d401\U0001d41a\U0001d42b\U0001d422\U0001d427\U0001d420\U0001d42c \U0001d401\U0001d41a\U0001d427\U0001d424
— Abhishek Kar (@Abhishekkar_) October 11, 2020
This thread is about the trader who with his reckless trading destroyed the entire Barings bank. In case you would like to read more such informative threads,do not forget to retweet and share as acts as encouragement
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https://t.co/6KnIySBGIG
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https://t.co/EiSGikt7jv
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https://t.co/bI2dH0XTSS
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\U0001d5e7\U0001d5db\U0001d5d8 \U0001d5e7\U0001d5e2\U0001d5e3 \U0001d7f1 \U0001d5e7\U0001d5db\U0001d5e5\U0001d5d8\U0001d5d4\U0001d5d7
— Abhishek Kar (@Abhishekkar_) July 21, 2020
The following thread will have top 5 for everything you need in the world of stock market and as learner who wants to REALLY grow. Make sure you #retweet the thread and let it reach the maximum number of people as sharing is caring.
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\U0001d5e7\U0001d5db\U0001d5d8 \U0001d5d7\U0001d5d4\U0001d5e5\U0001d5de \U0001d5e6\U0001d5dc\U0001d5d7\U0001d5d8 \U0001d5e2\U0001d5d9 \U0001d5e6\U0001d5e7\U0001d5e2\U0001d5d6\U0001d5de \U0001d5e7\U0001d5e5\U0001d5d4\U0001d5d7\U0001d5dc\U0001d5e1\U0001d5da
— Abhishek Kar (@Abhishekkar_) July 6, 2020
In the following thread you will understand a few dark truths about stock trading as a profession.
Sadly everyone touches the only green side but there has to be a balance. Don't forget to #retweet for wider reach.
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Nano Course On Python For Trading
==========================
Module 1
Python makes it very easy to analyze and visualize time series data when you’re a beginner. It's easier when you don't have to install python on your PC (that's why it's a nano course, you'll learn python...
... on the go). You will not be required to install python in your PC but you will be using an amazing python editor, Google Colab Visit https://t.co/EZt0agsdlV
This course is for anyone out there who is confused, frustrated, and just wants this python/finance thing to work!
In Module 1 of this Nano course, we will learn about :
# Using Google Colab
# Importing libraries
# Making a Random Time Series of Black Field Research Stock (fictional)
# Using Google Colab
Intro link is here on YT: https://t.co/MqMSDBaQri
Create a new Notebook at https://t.co/EZt0agsdlV and name it AnythingOfYourChoice.ipynb
You got your notebook ready and now the game is on!
You can add code in these cells and add as many cells as you want
# Importing Libraries
Imports are pretty standard, with a few exceptions.
For the most part, you can import your libraries by running the import.
Type this in the first cell you see. You need not worry about what each of these does, we will understand it later.
==========================
Module 1
Python makes it very easy to analyze and visualize time series data when you’re a beginner. It's easier when you don't have to install python on your PC (that's why it's a nano course, you'll learn python...
... on the go). You will not be required to install python in your PC but you will be using an amazing python editor, Google Colab Visit https://t.co/EZt0agsdlV
This course is for anyone out there who is confused, frustrated, and just wants this python/finance thing to work!
In Module 1 of this Nano course, we will learn about :
# Using Google Colab
# Importing libraries
# Making a Random Time Series of Black Field Research Stock (fictional)
# Using Google Colab
Intro link is here on YT: https://t.co/MqMSDBaQri
Create a new Notebook at https://t.co/EZt0agsdlV and name it AnythingOfYourChoice.ipynb
You got your notebook ready and now the game is on!
You can add code in these cells and add as many cells as you want
# Importing Libraries
Imports are pretty standard, with a few exceptions.
For the most part, you can import your libraries by running the import.
Type this in the first cell you see. You need not worry about what each of these does, we will understand it later.
