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Mental Model: Circle of Competence


Stashed in: #success, Decisions, Warren Buffett, Awesome, Venn!

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Reminds me of what people think success looks like:

what success really looks like meme tumblr

The squiggly line involves having to do things outside the circle of competence.

Farnam Street explains:

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:

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, however, is vital.

Circle of Competence is part of the Farnam Street latticework of mental models.

Read more: http://www.farnamstreetblog.com/2013/12/mental-model-circle-of-competence/

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