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.
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.
The idea surfaced in the 1996 BH annual letter.
"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."
A Circle of Competence is built over time.
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.
To engage this mental model in your life, there are two key processes to go through:
(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.
Let’s look at a few examples of where we see the Circle of Competence in action and how it can help you win.
In investing?
Berkshire Hathaway provides the classic example of investing success from sticking within the boundaries of your Circle of Competence.
Warren Buffett and Charlie Munger have consistently passed on investment opportunities that fell outside of their respective Circles of Competence.
At times, it led to what might look like big misses, including failing to see the potential and invest in Google and Amazon.
But while you hear about these misses (“the anti-portfolio”), you don’t read about all of the bad decisions it saved them from making.
As Munger once said, you can become a consistent winner by “trying to be consistently not stupid, instead of trying to be very intelligent."
In business?
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.
So how can you implement the Circle of Competence model into your life?
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?
Next, be ruthlessly honest with yourself about that circle and its boundaries.
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.
Finally, keep expanding and deepening your Circle of Competence.
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.
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He has been wrong (or lying) so often that it will be nearly impossible for me to track every grift, lie, deceit, manipulation he has pulled. I will use...
... other sources who have been trying to shine on light on this grifter (as I have tried to do, time and again:
Example #1: "Still not seeing Sweden signal versus Denmark really"... There it was (Images attached).
19 to 80 is an over 300% difference.
Tweet: https://t.co/36FnYnsRT9
Example #2 - "Yes, I'm comparing the Noridcs / No, you cannot compare the Nordics."
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Tweets: https://t.co/XLfoX4rpck / https://t.co/vjE1ctLU5x
Example #3 - "I'm only looking at what makes the data fit in my favour" a.k.a moving the goalposts.
Tweets: https://t.co/vcDpTu3qyj / https://t.co/CA3N6hC2Lq
He has been wrong (or lying) so often that it will be nearly impossible for me to track every grift, lie, deceit, manipulation he has pulled. I will use...
... other sources who have been trying to shine on light on this grifter (as I have tried to do, time and again:
Ivor Cummins BE (Chem) is a former R&D Manager at HP (sourcre: https://t.co/Wbf5scf7gn), turned Content Creator/Podcast Host/YouTube personality. (Call it what you will.)
— Steve (@braidedmanga) November 17, 2020
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Tweets: https://t.co/XLfoX4rpck / https://t.co/vjE1ctLU5x
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Tweets: https://t.co/vcDpTu3qyj / https://t.co/CA3N6hC2Lq
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Harvard is being eclipsed by institutions that have different ideas about how to run a 21st Century institution. Stanford, for one; the UC system; the "public Ivys".
As a dean of a major academic institution, I could not have said this. But I will now. Requiring such statements in applications for appointments and promotions is an affront to academic freedom, and diminishes the true value of diversity, equity of inclusion by trivializing it. https://t.co/NfcI5VLODi
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Harvard's discriminatory policies are becoming increasingly well known, across the political spectrum (see, e.g., the recent lawsuit on discrimination against East Asian applications.)
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Harvard is being eclipsed by institutions that have different ideas about how to run a 21st Century institution. Stanford, for one; the UC system; the "public Ivys".
