"Circle of competence" is a mental model introduced by Warren Buffet in a letter to Berkshire Hathaway shareholders in 1996. The model can be applied in many areas of life, career and investing.
So, how can you use this mental model to make great decisions? A thread... 🧵
👇
So, how can you use this mental model to make great decisions? A thread... 🧵
👇
1/10
Your circle of competence represents what you really know, versus what you think you know.
The circle is surrounded by a larger circle of subjective, and often over-inflated belief in one’s understanding and ability.
👇
Your circle of competence represents what you really know, versus what you think you know.
The circle is surrounded by a larger circle of subjective, and often over-inflated belief in one’s understanding and ability.
👇
2/10
We build our circle of competence through academics, self-study, environment, and life experiences.
@naval talked about this concept as “specific knowledge” that can be developed by one’s innate talents, genuine curiosity, and passion.
👇
We build our circle of competence through academics, self-study, environment, and life experiences.
@naval talked about this concept as “specific knowledge” that can be developed by one’s innate talents, genuine curiosity, and passion.
👇
3/10
Deep competence in a narrow subject area can deliver meaningful success while minimizing the risk of failure.
One can use the 80/20 Pareto principle, to allocate time and deep focus in the area of competence for maximum impact.
👇
Deep competence in a narrow subject area can deliver meaningful success while minimizing the risk of failure.
One can use the 80/20 Pareto principle, to allocate time and deep focus in the area of competence for maximum impact.
👇
4/10
Identifying the boundaries of competence requires honest assessment and testing one's knowledge on the subject.
Self-reflection through journaling, long form writing, and feedback from a SME or a mentor are some of ways to test the boundaries of one's competence.
👇
Identifying the boundaries of competence requires honest assessment and testing one's knowledge on the subject.
Self-reflection through journaling, long form writing, and feedback from a SME or a mentor are some of ways to test the boundaries of one's competence.
👇
5/10
Operating within these boundaries can ensure steady progress in life and investing.
If your goal is to minimize risk, then stay within your circle of competence; however, if your goal is to expand and innovate, you may need to push the boundaries of your circle.
How?
👇
Operating within these boundaries can ensure steady progress in life and investing.
If your goal is to minimize risk, then stay within your circle of competence; however, if your goal is to expand and innovate, you may need to push the boundaries of your circle.
How?
👇
6/10
Start with genuine curiosity. Read, listen, and watch what you can on the subject. Learn with such intensity that you can debate on both sides of the topic.
You can expand your circle of competence, gradually with curiosity, and prolonged focused learning on the subject.
Start with genuine curiosity. Read, listen, and watch what you can on the subject. Learn with such intensity that you can debate on both sides of the topic.
You can expand your circle of competence, gradually with curiosity, and prolonged focused learning on the subject.
7/10
As information on every subject becomes more widely accessible, it may pose a challenge in clearly identifying the boundaries of one’s competence.
However, be careful not to conflate new information on the subject as growing competence without a critical evaluation.
👇
As information on every subject becomes more widely accessible, it may pose a challenge in clearly identifying the boundaries of one’s competence.
However, be careful not to conflate new information on the subject as growing competence without a critical evaluation.
👇
8/10
Knowing one’s true competence can help make in making go/no-go decision when presented with a new investment, career, or life opportunity.
It may help in deciding when to “go for it” with the willingness to go deeper or sit out when there’s FOMO.
👇
Knowing one’s true competence can help make in making go/no-go decision when presented with a new investment, career, or life opportunity.
It may help in deciding when to “go for it” with the willingness to go deeper or sit out when there’s FOMO.
👇
9/10
In this era of constant change, we will be required to make decisions outside of our circle of competence.
When making high-risk decisions outside the boundary, resort to "slow thinking" with deliberate effort as referenced In Thinking, Fast and Slow, by Kahneman.
👇
In this era of constant change, we will be required to make decisions outside of our circle of competence.
When making high-risk decisions outside the boundary, resort to "slow thinking" with deliberate effort as referenced In Thinking, Fast and Slow, by Kahneman.
👇
10/10
Circle of competence is not to act within a comfort zone of familiarity.
It is intended to help create awareness so one can differentiate the real from perceived competence.
👇
Circle of competence is not to act within a comfort zone of familiarity.
It is intended to help create awareness so one can differentiate the real from perceived competence.
👇
If you find this helpful, please retweet the 1st tweet of this thread. Follow us @relaytime and subscribe to our monthly newsletter.
getrevue.co/profile/relayt…
getrevue.co/profile/relayt…
• • •
Missing some Tweet in this thread? You can try to
force a refresh
