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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@keving

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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. 

The circle can be widened, but only slowly and over time. 

The 'Circle Of Competence' Theory Will Help You Make Vastly Smarter Decisions

businessinsider.com

Buffet's Way

Buffett follows the Benjamin Graham school of value investing, which are :

  1. Look for securities whose prices are unjustifiably low based on their intrinsic worth.
  2. Look at companies as a whole - company performance, company debt, and profit margins, whether companies are public, how reliant they are on commodities, and how cheap they are.

Warren Buffett: How He Does It

investopedia.com

Hidden games

Hidden games are played in sandboxes that people don’t even realize exist. Hidden games have a higher return, but they are more long-term and abstract. For example, a hidden game is starting a business in an unsexy industry (i.e., building tunnels with Elon Musk).

Learning Speed: What Jeff Bezos, Elon Musk, And Bill Gates Know That Most People Don’t

medium.com

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