I first learned about “circles of confidence” when I got my first, “adult” computer programming job at Johnson and Johnson, many, many years ago.
I didn’t understand what it meant at the time but I understand it very clearly now: The more you understand your own circle of competence the more effective you become as a human being, especially in the context of teams and organizations.
It does three things:
- It helps you avoid problems. This is because you are more informed and more self-aware about what you are good at and what you are not goo at. Consequently, you will not often find yourself in compromising or poorly leveraged situations where your skills do not match the task at hand.
- It helps you identify opportunities for growth and improvement. Again, creating the firm delineations between strengths and weaknesses allows the individual – and the larger team – to make better judgement calls on how to accelerate, optimize, and create outsized outcomes.
- It helps you learn from others. When you know what the areas of improvement are it means that you can correctly identify folks who can help level you up and assist you in breaking through any “ceilings” you may have in your thinking and your execution.
The concept of the Circle of Competence was made incredibly popular by Warren Buffet as a way to help investors focus on the areas of investment that they knew the best and therefore would have a higher likelihood of better returns!
The concept first appeared 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.
I feel like my life has been one of trying to figure out what my “circles of competence” might be and trying to accurately asses what the boundaries are.
Stuff to noodle on, that is for sure.