#181: Circle of Competence, Confidence vs. Competence & Strategic Incompetence
3 Ideas in 2 Minutes on Confidence and Competence
I. Circle of Competence
The Circle of Competence posits that we all have a unique area of expertise we’ve built through talent, study and experience. The concept was originally coined by Warren Buffett in the context of investing. Here’s how he explained it in a 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.
The challenge is to identify your inner circle of competence, the things you know. Don’t take unnecessary risks by venturing into areas of ignorance. Or worse: Things about which you only have dangerous half-knowledge. Buffett recommends: Be like his business partner Rose Blumkin who became a retail legend by sticking to what she knew best: furniture.
👉 For more details, check out my article Circle of Competence: How to Escape Competition Through Authenticity.
II. Confidence vs. Competence
What’s the relationship between competence and confidence? Former CIA officer Andrew Bustamante shared his thoughts on Tom Bilyeu’s podcast Impact Theory.
Confidence is a perception, not a real thing. Confidence is how you perceive your own emotional reaction and your own emotional relationship with then environment around you.
Confidence doesn’t exist. It can’t be measured. It can’t be improved or reduced. Confidence is a non-sequitur. It’s an empty word. What we mean when we say confidence is competence.
We want competence in what we’re doing. Because the more competent you are, the more comfortable you are executing, the more comfortable you are taking risks, which is, when you take a risk, it’s called courage.
—Andrew Bustamante, Impact Theory
III. Strategic Incompetence
When people start asking you to do things you don’t like doing, your competence can become a problem. Strategic Incompetence takes care of that:
Develop 'strategic incompetence' — people won't ask you to do things you hate to do, if you're bad at them.
—Naval Ravikant
It’s very much reminiscent of creative incompetence, a tactic used to avoid falling victim to the infamous Peter Principle. 🐘
Have a great week,
Chris
themindcollection.com