In Business and life, we should respect our circle of competence. We may have a few circles of competence but are unwise to jump around beyond that. But we also have to accept the fact that in order to succeed it is impossible to navigate the entire world with our limited set of skills and time in our lifetime.
“You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence. The size of that circle is not very important; however, knowing its boundaries is vital.”- Charlie Munger
Our Circle of competence comes from years of practice in a field of knowledge. It involves numerous observations, experimentations, and mistakes giving person adaptability and depth in problem-solving. With the Circle of Competence, we know what we don’t know, anticipate, and respond to problems because we faced them before or gained knowledge to counter them. With Circle of Competence, we have developed optionality and can gather different information or resources to adapt across different variables.
Our Circle of competence has to constantly validate reality and never take it for granted. Every knowledge gets updated so too must our competence. And we can update our competency in three ways:
Curiosity to Learn: Learning comes from experience & reflection. Learn from your own mistakes/ experiences. Learn from experiences of others through books, videos, articles, tweets, podcasts, etc. Learning everything on our own is costly and takes many lifetimes.
“Learn from the mistakes of others. You can’t live long enough to make them all yourself.”
Honest feedback & self-monitoring: We need to understand reality and not be overconfident. We have to evaluate and observe the outcomes of our decisions with self-journal.
External Feedback: We need occasionally an external feedback system to keep our feet on the ground. People who we can trust and give us honest feedback on our traits. It is extremely difficult to maintain our circle of competence without outside perspective & vantage points. We can’t be left to ourselves. We are filled with lots of biases.
We operate in a large network of knowledge and interconnected outcomes. Now a large part of achieving what we want and operating in a multi-disciplinary environment involves acknowledging and accepting that we are not in our circle of competence- that we may not know what we are doing.
When Queen Elizabeth I became the Queen of England at age 25 in 1558, she had no prior knowledge about running an empire and moreover taking reigns from turbulent years under her father, brother, and sister. She knew running a country was out of her core competency. She had an excellent education but a prominent personality trait of hers was admitting what she didn’t know and adapt to it. In her first speech, she included “I mean to direct all my actions by good advice and counsel.”
She proceeded to become Queen and build a trusted Royal council consisting of the Old and the New. She created a counsel not filled with Yes Men but a small group of people who can debate and challenge opinions in an open environment. An environment that leads to sound advice that factored in all the core competence of the people involved in the council. Queen Elizabeth I sowed the seed of prosperity and loyalty in England which created one of the greatest empires in history.
Facing an environment or situation where we are out of our depths is inevitable and preparing ourselves with mental models to navigate such waters will give us an edge over others.
We can pack the approach to operate outside of our expertise or competence in four ways:
Learn and gather the basics of the field/ industry/ realms we are going to operate through the internet, books & articles, etc. Basic First principles of a field have to be understood. Most Importantly, we have to acknowledge the fact that we don’t know anything & we are a starter (Because little knowledge is a dangerous thing and overconfidence blinds us).
Talk to someone whose circle of competence is in that area. We should do our basic research and formulate questions to ask to gather information to make an informed decision. If you ask for ready answers, the person will be giving you a fish. If you ask thoughtful questions, you will possibly know how to fish. We should strive to understand the rationale and logic behind an answer; how a person goes about answering your question rather than just taking advice at face value.
Try to find and gather models and foundational concepts of that field that you can use as a map or guide to augment your limited understanding.
Build a core team or counsel. Having a small group of leaders from different departments within an organization or in your friends circle immensely creates a strong advisory board that contributes their circle of competency in the counsel. Leave room for open discussions and free-thinking with proper arguments.
How to go about asking questions to people in other circles of competence:
In a high stakes scenario, you can try to ask difficult questions probing the limits of their circle of competence. One way is to take the wisdom of a 5-year-old kid and ask the 5 Whys behind an answer.
Asking the person what he/she would do if they were in your situation (Skin in the game question)
Asking the person what he/she won’t do or avoid if they were in your situation (Inverting the question)
Note: When taking advisory, always factor in the problem of incentive or what does the advisor stands to gain from it. Ex- what’s a financial advisor’s expense ratio or cut or hidden charges when giving sound advice. Remedy: do quick foundational research on an as-needed basis to call out any bluff.
When we are honest about our limits of knowledge and competence; we can improve and learn from our vulnerability. When we understand our shortcomings, we can learn how to operate and better navigate our outcomes. We become aware of our blind spots. Our realities and natural world don’t care about competence and vulnerabilities. We have to make financial decisions without being in Accounting, HR decisions without human psychology, tech decisions without knowing to code, make products without knowing every minute details of our customer’s life.
In any given situation, there are people who have a circle, who have put in the time and effort to really understand the information. Stay your feet on the ground and talk to these people.