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Understanding your Circle of Competence: How Warren Buffett Avoids Problems

https://fs.blog/2013/12/mental-model-circle-of-competence/

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Understanding your Circle of Competence: How Warren Buffett Avoids Problems
Understanding your circle of competence helps you avoid problems, identify opportunities for improvement, and learn from others. The concept of the Circle of Competence has been used over the years by Warren Buffett as a way to focus investors on only operating in areas they knew best.

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Circle of Competence

Circle of Competence

Each of us, through experience or study, has built up useful knowledge on certain areas of the world. Some areas are understood by most of us, while some areas require a lot more specialty to evaluate. 

It is important to honestly define what we know and stick to those areas. 

Our circle of competence can be widened, but only slowly and over time.

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