Circle of Competence

Know what you know, know what you don’t know, and stay within your circle.

The Core Idea

Your circle of competence represents the subjects and areas where you have genuine expertise and deep understanding. Operating within this circle dramatically increases your odds of success. The key is being honest about its boundaries and knowing when you’re stepping outside of it.

Key Principles

Honest Self-Assessment Understanding your competence circle requires brutal honesty about what you truly understand vs. what you think you understand.

Boundaries Matter The size of your circle matters less than knowing where the edges are. A small, well-defined circle beats a large, fuzzy one.

Maintenance Required Competence circles shrink without use and expand with deliberate practice. They’re dynamic, not static.

Outside Your Circle is Dangerous The biggest mistakes happen when you believe you’re inside your circle but you’re actually outside it.

Applications

Decision Making Before making significant decisions, ask: “Is this within my circle of competence?” If not, either learn enough to bring it inside, or defer to someone whose circle includes it.

Career Strategy Build deep competence in a specific domain rather than being superficial across many. Then slowly expand your circle from that foundation.

Investing Warren Buffett’s primary rule: Only invest in businesses you understand. If you can’t explain how it makes money, it’s outside your circle.

Learning Strategy Be deliberate about which circles to expand. Don’t try to know everything - focus on areas that compound with your existing competence.

The Three Zones

Inside the Circle

You have deep understanding and can predict outcomes reliably
You know the second and third-order effects
You can explain it to others clearly
You’ve seen it across multiple contexts

Edge of the Circle

You have partial understanding but significant gaps
You can identify what you don’t know
You need outside input for major decisions
This is the learning zone

Outside the Circle

You have only surface-level understanding
You don’t know what you don’t know
You’re likely to make costly mistakes
Either invest time to learn or defer to experts

How to Map Your Circle

List areas where you have expertise - Be specific, not general
Test your understanding - Can you explain the fundamentals? Predict outcomes? Teach others?
Identify your edge cases - Where does your understanding break down?
Mark the dangerous areas - Where do you think you know more than you do?
Note adjacent areas - Where could you expand effectively?

Expanding Your Circle

Deliberate, not accidental Choose consciously which competencies to develop based on their strategic value.

Build from strength Expand into areas adjacent to your current competence. The foundation you have accelerates new learning.

Go deep before broad Mastery in one area beats surface knowledge in many. Depth provides the pattern recognition to expand effectively.

Learn from experience Reading about something doesn’t bring it inside your circle. You need real feedback from application.

Working Within Your Circle

Make your best decisions inside your circle of competence
Seek advice when approaching the edges
Defer entirely when outside your circle
Be honest when you don’t know
Don’t fake expertise - the cost is too high

Common Pitfalls

Confusing familiarity with competence
Overestimating the size of your circle
Letting your circle atrophy from lack of use
Not updating your circle as the world changes
Being intimidated by others’ circles instead of building your own
Expanding too broadly instead of building depth

First Principles - Understand fundamentals to know your true competence
Inversion - What would indicate you’re outside your circle?
Leverage - Maximum leverage comes from operating inside your circle

“Know what you know and know what you don’t know.” - Confucius

“The most important thing is to know what you don’t know.” - Warren Buffett

“I’m no genius. I’m smart in spots—but I stay around those spots.” - Tom Watson Sr.