But as Buffett so eloquently put it, we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and stick to those areas. Our circle of competence can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.
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Understanding your Circle of Competence: How Warren Buffett Avoids Problems in any number of restaurants and restaurant chains; public or private. It’s not all that complicated.
However, can most of us say we understand the workings of a microchip company or a biotech drug company at the same level? Perhaps not.
<span>But as Buffett so eloquently put it, we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and stick to those areas. Our circle of competence can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.
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Circle of Competence applies outside of investing.
Buffett describes the circle of competence of one of his business managers, a Russian immigrant with poor English who buil Summary
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