Circle of Competence, Hobbies vs. Hustles, & More
Today at a Glance
- Question: Your 80-year-old self.
- Quote: Learn by doing.
- Framework: The Circle of Competence.
- Tweet: Geographic advantages of the U.S.A.
- Article: Not all hobbies should become hustles.
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Question for the time traveler:
What would your 80-year-old self think about the decisions you're making today?
I find mental time travel to be a very useful trick.
When you travel into the future, you can reflect on the present with a new lens and perspective.
Your 80-year-old self probably wouldn't care much about the little stresses that are throwing you off course, but they would care a lot about the decisions you're making that are going to compound (positively or negatively) into the future.
Your 80-year-old self would remind you to always make that investment in yourself. Your 80-year-old self would remind you to get enough sleep, exercise a bit more, and eat well.
Most importantly, your 80-year-old self would remind you to spend ample time with those you love, and laugh a whole lot along the way.
Quote on the merits of self-education:
"Formal education will make you a living; self-education will make you a fortune." - Jim Rohn
Life is one long apprenticeship, the most valuable learning always comes through doing.
Framework for avoiding unforced errors:
The Circle of Competence
This weekend, I'm attending the Berkshire Hathaway Annual Shareholder Meeting in Omaha, Nebraska. For the uninitiated, this is the annual event hosted by Warren Buffett and Charlie Munger that is attended by over 40,000 people from around the world.
The actual event is pretty simple: Two legendary 90+ year old investors sit in front of 40,000 people and answer questions for hours on end. Their energy and enthusiasm is infectious. I'm not sure how many more years they'll be able to do it, so I'm taking the opportunity to see them live again.
In honor of Buffett and Munger, today's framework is one of their classics: the Circle of Competence.
The Circle of Competence says that each person has a unique set of skills, knowledge, and experience that they can use to analyze and evaluate opportunities effectively.
By identifying and judiciously staying within their Circle of Competence, you can avoid making uninformed decisions and reduce the risk of loss.
Buffett and Munger have long emphasized the importance of staying within one's Circle of Competence throughout their investing careers. They argue that investors should focus on industries and businesses they understand well and avoid investing in areas they don't understand.
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." - Charlie Munger
Importantly, your Circle of Competence is not a fixed entity. It can (and should!) expand as you learn and grow. Both Buffett and Munger are famously avid readers, spending most of their time reading and learning. These actions naturally expand the Circle of Competence.
I think of three pillars of action here:
- Identify the Boundary: Be ruthless in identifying your current Circle of Competence. Do not fool yourself into thinking you know more than you really do.
- Enforce the Boundary: When making decisions, be self-aware in enforcing whether you are within your Circle of Competence. If not, determine if the risk is worth the potential reward.
- Expand the Boundary: Be a lifelong learner. Go deep on new areas and work to expand your circle. What you know today need not be the limit of your knowledge of tomorrow.
The Circle of Competence framework is a tool anyone can use to focus on your strengths and avoid unforced errors. Identify your circle, work to expand it, but always stay within it.
Tweet I found fascinating:
Very neat thread on the lesser-known geographic advantages of the United States. The part about the Mississippi River System was fascinating.
Article I need to read 10 times:
I need to read this article over and over again.
I recently shared a life hack in a similar vein: "Have at least one thing in your life that you are bad at (but love doing). Ambitious, driven people tend to do everything with some specific end in mind. It's wonderfully refreshing to do something just for the sake of doing it."
Unfortunately, I struggle to embrace this in reality. As someone who finds fulfillment in growth, I definitely "pin the butterfly" and turn most hobbies into hustles.
I'm going to set a reminder to re-read this article regularly.