Circle of Competence

Mental Model

Lately, I have been studying about “Mental Models” help us “lump” complex ideas and details into handy nuggets of actionable information. Charlie Munger once said

“… you can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. You’ve got to have models in your head.”-Charlie Munger

My favorite mental model to discuss is what Warren Buffett called a “circle of competence”. You create your circle by building up useful and actionable knowledge from experience, study and refinement. Consider driving a car in North America. When you study to get your license, you begin to accumulate that useful knowledge and the more you drive, you gain more and more experience. There are going to be new things that happen that make you expand your circle a little bit. For example, maybe you learn to drive in the spring, you have yet to drive in the snow. Or maybe you haven’t had a tire blow out on the interstate? As things happen, you learn and collect knowledge and you circle becomes larger.

Consider this, you have decided to take a trip to Scotland to tour various Scotch Distilleries, you arrive in Edinburgh and go to the car rental counter. Your mental model for driving has not prepared you for what you are about to experience. The driver sits on the opposite side from where you are used to…the cars are on the opposite side of the road and there is a manual transmission in the vehicle?

Your original mental model will help you understand a lot of what to do (accelerator, brakes, turn signal, etc.…) but the manual transmission, the clutch, the different direction of driving…these are new and different. This is now both a challenge and an opportunity to grow your circle of competence. Its not going to be easy but it will be useful, and it is important for your trip.

Finding your circle

The best run organizations and teams are those where different people with different backgrounds and different circles work together to produce what is best for the organization and the consumers.

“I’m no genius, I’m smart in spots-but I stay in those spots”-Tom Watson, SR.

Border of Knowledge

This border is an imaginary wall…the wall that separates what you know from what you don’t know. Anything on the outside of that border are the things that you know you don’t know…these are things like…flying a plane, playing piano, administering tableau or power bi for an enterprise.

When one acknowledges they are beyond the borders, it is important to find people whose circle contains that knowledge. Maybe get piano lessons, or allow the administrator to administrate the system?

Zone of Illusion

“Its really important to stay within your circle of competence. If you are not sure what the boundaries of that circle are for you, then you don’t really have a real mastery of your field”-Charlie Munger

This is the most dangerous place to be. People in this zone are at risk of causing serious negative and deleterious outcomes to themselves and to others…In business that could lead to a pediatric hospital wasting almost two Million Dollars on a useless database project…but at worst will end tragically.

One circle? Or Many Circle?

“So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.”-Charlie Munger

Gang, we are not limited to just our limitations. Acknowledging your “border of knowledge” is your starting point… when you get to that border, you have a choice…continue on and become competent…or find the competent person. There is no shame in acknowledging that you don’t know something…there is shame in blaming your direct reports for your failures and your limitations and kicking them off the project because they have told you that the project is not feasible and there are a multitude of far superior options…but I digress.