Circle of Competence
That basic knowledge, along with some understanding of accounting and a little bit of study, would enable one to evaluate and invest in any number of restaurants and restaurant chains, public or private. It’s not all that complicated.
fs.blog • Understanding Your Circle of Competence: How Warren Buffett Avoids Problems
Reading List
[ ] Check Mental Models volumes to find circle of competence.
[ ] Add a track record of what you know and have experienced doing.
[ ] Create a Performance Journal = What went well and what went wrong
You might fail if you move beyond what you find comfortable. You might apply new knowledge incorrectly or misunderstand the key points of an argument in a new field. This is painful. It also offers the opportunity to learn from your failures. We all hate looking dumb, but you can’t let failure dissuade you from trying to expand your circle of... See more
Farnam Street • Accelerated Learning: Learn Faster and Remember More
Expanding one’s circle of competence meets failure though it is not to be dissuaded from.
Farnam Street
Our circle of competence can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.
Reader
Growing the circle of competence can be gradual unless we risk making more mistakes along the way. - buffet
The concept of the Circle of Competence has been used over the years by Warren Buffett as a way to focus investors on only operating in areas they knew best. The bones of the concept appear in his 1996 Shareholder Letter:
... See moreWhat an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be
fs.blog • Understanding Your Circle of Competence: How Warren Buffett Avoids Problems
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. Over time, work to expand that circle but never fool yourself about where it stands today, and never be afraid to say “I don’t know.”
fs.blog • Understanding Your Circle of Competence: How Warren Buffett Avoids Problems
1996 Shareholder Letter:
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 circle is not very important; knowing its boundaries,... See more
Reader
Warren Buffet popularised it.
It did not hurt Mrs. B to have such a narrow area of competence. In fact, one could argue the opposite. Her rigid devotion to that area allowed her to focus. Only with that focus could she have overcome her handicaps to achieve such extreme success.
Reader
tool for focus