Alec Hogg: Knowing your Circle of Competence

When reflecting on how best to tackle 2021, two principles emerged: Life is complex and getting ever more so; and making the most of it requires disciplined exploration.

Also read: Alec Hogg: Steven Nathan's shock exit from 10X

That sent me back to the concept of knowing your circle of competence – something Warren Buffett and Charlie Munger refer to often including at most Berkshire Hathaway AGMs in Omaha. It's a deceptively simple but brilliantly effective discipline. And, indeed, also a path to successful investing.

Buffett discussed the concept in his 1996 letter to Berkshire shareholders where he wrote: "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."

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