Circle of Competence
Know what you know—and what you don't.
Explanation
Investor Warren Buffett teaches that you should stick to areas where you have genuine expertise and experience. Inside your circle of competence, you can make informed decisions. Outside it, you're essentially guessing. The size of your circle doesn't matter—what matters is honestly knowing where its boundaries are. Ego tempts us to think our circle is bigger than it really is.
Real-World Example
Buffett avoids tech stocks—outside his circle. He sticks to businesses he understands: insurance, retail, consumer goods. A surgeon shouldn't give legal advice. A programmer shouldn't design bridges. WeWork's founder tried to revolutionize education, farming, and living—all outside his competence. Result: $40B loss.
How to Apply
Draw your circle: What do you know deeply from experience? What do you know superficially? What do you not know? For decisions: Inside circle = move fast, trust intuition. On edge = research carefully. Outside = get expert help or avoid. Expand slowly through deliberate learning, not assumptions.