What is the Circle Of Competence?
Each of us, through experience or study, has built up useful knowledge in certain areas of the world. Some areas are understood by most of us, while some areas require a lot more specialty to evaluate.
The bits you understand well is your circle of competence.
For eg: Most of us understand the economics of a restaurant. That basic knowledge, along with some understanding of accounting would enable one to evaluate and invest in any number of restaurants. However, can most of us say we understand the workings of a microchip company or a biotech drug company at the same level? Perhaps not.
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Understanding your Circle of Competence: How Warren Buffett Avoids Problems
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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.
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