Circle of competence

This is one of my favorite concepts in life. It is actually Warren Buffett’s belief towards investing – to only pick and analyze companies which he understands. To focus investors on areas that they have an edge in. This is his way to win.
Personally, I also believe that this applies to life – that if we focus our effort and commit to one area, we will become highly successful in it and that we will win in life, too. I am also in the midst of building my career in this one singular area so I cannot say for sure that it WILL definitely work.. But based on the many successful individuals, I believe it to be true.

this recent article I came across on Business Insider illustrates this really well:

“If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless — that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence — which results partly from what they were born with and partly from what they slowly develop through work.”

Recently, I met with quite a few people who have a keen interest to start their own business but whom have put off their aspirations because of their lack of capital. As a result, they also do not build on their competency, which is a HUGE waste… because out there, there are people whose ‘edge’ is that they are rich and they are willing to invest. Food for thought for all of us? To build a circle of competence, regardless .