Circle of competence - Deepstash

deepstash

Beta

Get an account to save ideas & make your own & organize them how you wish.

deepstash

Beta

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

Circle of competence

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. 

175 SAVES


This is a professional note extracted from an online article.

Read more efficiently

Save what inspires you

Remember anything

IDEA EXTRACTED FROM:

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

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

https://www.businessinsider.com/the-circle-of-competence-theory-2013-12#

businessinsider.com

1

Key Idea

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. 

SIMILAR ARTICLES & IDEAS:

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 evalu...

Deduction and Mindfulness Go Together

Sherlock Holmes observed facts without being judgmental. He would construct a hypothesis about what he believed happened. He would then search for more evidence to logically validate his ini...

All Stories Are Possible — Until They Are Not

Agatha Christie's Hercule Poirot encourages everybody to tell their story.  Stories help Poirot comprehend what kind of person the victim was. And to uncover the murderer’ motive.

Storytelling is powerful to uncover insights, not just the truth. Design Thinking — a process for creative problem solving — leverages the power of stories to detect human desires and needs.

Be Relentless

Sarah Linden is the least self-aware television detective.

Her dedication to her work and stubbornness are unbeatable. She never gives up. Even though she fails in many aspects of her life — like being a mother. But, she keeps showing up and trying to do better. She tries again, fails again, and fails better.

5 more ideas

Separate decision quality from results

People have a natural tendency to conflate the quality of a decision with the quality of its outcome. They're not the same thing. 

You can make a smart, rational choice but still ...

Luck and Incomplete Information

Why don't smart decisions always lead to good results? Because we don't have complete control over our lives — and we don't have all of the information. 

You can opt not to drink on New Year's Eve, for instance, but still get blindsided by somebody who did to drink and drive. You made a quality decision, but happenstance hit you upside the head anyhow.

Thinking in Bets

Becoming comfortable with uncertainty and not knowing is a vital step to becoming a better decision-maker.

What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge.

2 more ideas

Focus on Systems Instead of Goals
Focus on Systems Instead of Goals

Most goals are out of our control. We have limited control to reach them. In a system, your focus is on all the parts that you do control. And system is a fancy word for “repeatable process”...

Leverage the Compound Effect

When you focus on developing systems and work every day, your work compounds over time, developing exponential growth. 

The more advantages you create, the more your next advantages pay off. A 1% gain every day compounds to almost 38x increase over a year.

Measure Output, Not Input

Systems are the best way to progress since they reward effort and we control all the variables. However, we need to have a sense of direction in those efforts, to know what we are trying to accomplish

Writing daily with no objective is just practice. If you want to achieve something, you need to commit to a certain output, like publishing a post on your blog weekly. At the end of the day, a system is a way to control how to achieve an output.

7 more ideas

Wisdom Of The Crowd

Collective intelligence or group thinking is an idea that by many minds working together, we can correct each other's errors in judgment and provide good results.

Companies employ intelligent...

Groupthink

The phenomenon of 'Groupthink' leads to ego clashes and reinforcement of existing biases. They somethings fail to reach any decision and may complicate matters further by incorporating all points of view. Design by Committee is something best avoided.

Brainstorming, on the other hand, involves creative, divergent thinking, which is different from the restrained, critical thinking that may be required to come to a decision.

Collective Intelligence

An extensive study in 'Groupthink' which included testing the social sensitivity, as well as the IQ of the individuals, showed that:

  • Equal participation was a key ingredient of better performance. Group dynamics can get worse if team members clash frequently.
  • If team members are pitted against each other for a common prize, like a promotion, then group work suffers.
  • If team members are not open to ideas from other members or are interrupting them, it can sabotage group performance.
  • Teams with a higher proportion of women have better collective intelligence.

2 more ideas

"Learning is deeper and more durable when it's effortful... Learning that's easy is like writing in sand, here today and gone tomorrow."

 -  Make It Stick: The Science Of Suc...

Bring it back from memory

Retrieval is so effective is that it strengthens the neural pathways associated with a given concept.

When you're attempting to recall an idea, method, or technique from memory, you're retrieving. Flash cards are a great example: They force you to recall an idea from memory, unlike a technique like highlighting where you're not burning anything into your brain. 

Connect new ideas

... to what you already know.

When you try to put a new idea into your own words, you're elaborating.

For example, if you're in physics class and trying to understand heat transfer, try to tie the concept into your real-life experiences, say, by imagining how a warm cup of coffee disperses heat into your hands.

4 more ideas

Being Mediocre

Most of us are in the 'mediocre' zone, making a living and trying to do our best in confining circumstances. We try to work, raise a family, and try to be happy.

Aiming to reach towards t...

Procrastination

Procrastination is generally looked down upon and thought of as laziness, but it is your body telling you that you need to back off and think about what you are doing. 

You should try and figure out why you are procrastinating, as it can be a symptom of something broken in your life.

Zero-Tasking

We all multitask at some point or the other, some of us more than others. Our attention and intelligence are deviated and substracted during multi-tasking.

Single-tasking is better than multi-tasking, as focusing completely on one thing at any given time is optimal. Even better is to move into silence and nothingness by doing zero-tasking. The more we zero-task (another name for mindfulness or meditation), the more we progress into creativity and excellence.

4 more ideas

FOBO: Fear of Better Options

Whether it is deciding what to watch on TV, or which job offer to accept, Fobo (Fear of better options) can affect anyone.

A Fobo-afflicted person may not make a decision due to wanting compl...

Technology accelerates FOBO

Sophisticated apps and social media only accelerate FOBO, giving us unlimited options. We are unable to decide due to a constant flow of new plans, events, invitations or commitments.

Decision-making people: Maximisers

Maximisers compare everything before making a decision, setting very high standards and expectations for themselves.

They often feel disappointed with their final decision after making it.

one more idea

Pioneers

They value possibilities and they spark energy and imagination.

They tend to be creative thinkers who believe taking big risks can produce great outcomes. They are outgoing, spontaneou...

Guardians

They favor stability, order and rigor.

Likely to stick with the status quo, they are deliberate decision-makers who are practical, focused on detail and reserved.

Drivers

They value change and they generate momentum.

Direct in the approach to people and problems, they are technical, quantitative and logical.

2 more ideas

Robert Kiyosaki

“A person can be highly educated, professionally successful, and financially illiterate.”

Robert Kiyosaki
Financial Literacy Questions

A financially literate person should be able to answer these questions:

  • How much are they earning after tax and after saving for retirement? Is it fair considering their education level and job title?
  • Are they earning above sector median rates, below, or on par?
  • How much goes to their retirement accounts?
  • How much goes into their investments?
  • What are the rates of return on their investments when benchmarked against an index like the S&P 500?
  • What are their financial plans?
  • Can they read a company's financial statement?
  • Do they understand their tax benefits?
  • Do they understand their retirement requirements?
  • Do they have a plan for retiring?