The circle of competence: a mental model
- A circle of competence is a mental model that helps mitigate the risk of failure associated with overconfidence by having a realistic view of your strengths. The term was first coined by Warren Buffett, one of the world’s most successful financial investors.
- Alongside his business partner Charlie Munger, Warren Buffett found success in only making financial investments in sectors that he had a comprehensive grasp of. In this way, Buffett avoided overconfidence in his knowledge or abilities, and instead relied on objective competence.
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Your circle of competence: should you stick within it or step outside of it?
nesslabs.com
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"I think the next best thing to solving a problem is finding some humor in it." -Frank Howard Clark
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Stick to your Circle of Competence
Charlie Munger once commented that "in order to disagree with somebody you must first understand their argument better than they do."
The most common way people lose money is to overestimate how clever they are and how much they know. Even after a fifty-year investing career, both...
Circle of competence
If you want to improve your odds of success in life and business then define the perimeter of your circle of competence, and operate inside.
The concept has been used by Warren Buffett and relates to the importance of honestly definining what we do know and to stick to those areas....
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