← Glossary/Decision
Circle of Competence
Make decisions inside what you actually understand. The aim is not the biggest circle, but knowing where its edge is.
Example
You play football every weekend, so you can spot a strong player in five minutes. You have never watched cricket, but you say a player looks great because everyone else says so. The first call is inside your circle. The second call is outside it.
How it fits in
Buffett's rule for investing applies to most decisions. What hurts people is not having a small circle but forgetting where it ends and confidently deciding outside it. Naming what you genuinely understand, and what only looks similar, is more useful than expanding the circle. Practising this on small calls before big ones is how you build the habit.
Where this is taught
Entrepreneurs who exemplify this
Practise it on the platform
Related terms
Whether the same action helps or hurts depends on the situation around it.
A way to make hard choices: picture yourself at eighty and ask which option you would regret skipping more.
Judge a choice by the information you had at the time, not by how it turned out. The result and the choice are separate things.