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Charlie Munger on the circle of competence
You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. You have to figure out where you’ve got an edge.
If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is attainable.
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MORE IDEAS ON THIS
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2.73K reads
What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that ...
WARREN BUFFET
102
1.78K reads
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 under...
83
937 reads
Stick to your spots
Buffet says we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and stick to those areas. Our circle of competence can be widened, but only slowly and over time. Mistakes are most often made when straying f...
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925 reads
CURATED FROM
Understanding your Circle of Competence: How Warren Buffett Avoids Problems
fs.blog
5 ideas
·7.37K reads
CURATED BY
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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