Circle of competence
Feeling sure and actually knowing are different things. Learn to find the edge of what you really understand, and how to decide sensibly when a choice falls outside it.
WHY THIS MATTERS
Your worst decisions felt fine at the time
Think of a decision that went badly: a purchase, an investment, a repair you tried yourself. Chances are you didn't feel lost when you made it. You felt reasonably sure. That is the problem this lesson solves. The feeling of being sure shows up whether or not you know what you're doing.
Reading three articles about used cars makes you feel much more confident. It barely changes your ability to hear a failing gearbox.
Circle of competence
The set of subjects where you really understand how things work, including how they go wrong. The phrase was made popular by the investor Warren Buffett, whose point was that the size of your circle matters much less than knowing where its edge is.
A nurse with ten years on a ward is deep inside her circle when judging whether a patient looks unwell. She is outside it when judging whether a flat's wiring is safe, however capable she feels.
Three zones
- What you know. You've done it many times and seen the results, good and bad.
- What you know you don't know. You're aware of the gap, so you ask, check or go slowly. This zone is safe.
- What you don't know you don't know. You can't see the questions you should be asking. Most expensive mistakes are made here, by people who felt fine.
Check yourself
Babak is a skilled software developer. A friend is opening a restaurant and invites him to put in a large part of his savings. Babak thinks: 'I'm good at analysing things, I eat out a lot, and the numbers look solid.' Where is he?
- Inside his circle: analytical skill transfers to any business with numbers in it
- Outside his circle: he can't name what sinks restaurants, so he can't judge the numbers
- At the edge: he knows exactly what he's missing
- Inside his circle: eating out several times a week teaches you how a restaurant really works
Show the answer
Outside his circle: he can't name what sinks restaurants, so he can't judge the numbers
Yes. Eating in restaurants shows him the dining room, not rent, waste, staffing or slow months. He can't judge a spreadsheet when he doesn't know what should be in it.
Four tests: am I inside the circle?
- Can I say how this usually goes wrong?
People who really know a field can list its common failures without thinking. If you can only describe how it goes right, you've only seen the brochure.
- Have I been wrong here before, and found out?
Competence comes from feedback. Ten years of doing something with clear results beats a hundred hours of reading about it.
- Can I predict what happens next?
Make a small prediction and check it. Inside your circle, you're right more often than chance.
- Do I know what the experts argue about?
Beginners think a field is simple. Knowing where the real disagreements are is a sign you've gone past the surface.
Check yourself
Which of these are signs you are inside your circle, and which are signs you are outside?
- You can name three ways this typically fails
- It all looks simple and you wonder why people find it hard
- You've made mistakes here and learned what caused them
- Your confidence comes from one video and a confident friend
- You can't think of any question to ask the seller
- You know which details an expert would check first
Show the answer
Inside: You can name three ways this typically fails, You've made mistakes here and learned what caused them, You know which details an expert would check first
Outside: It all looks simple and you wonder why people find it hard, Your confidence comes from one video and a confident friend, You can't think of any question to ask the seller
How to act at the edge
- Say it out loud
'I'm outside my circle here.' This one sentence moves you from the dangerous zone to the safe one: now you know you don't know.
- Borrow a circle
Find someone who is inside and has nothing to gain from your choice. A mechanic you pay to inspect the car, not the seller's mechanic. Ask: 'What would you check? What goes wrong most?'
- Shrink the bet
If you can't get good advice, make the decision smaller or easier to undo. A small amount, a short contract, a trial period.
- Use a plain default
Outside your circle, the boring standard option usually beats the clever one you can't evaluate.
Check yourself
Dr. Ahmadi is an excellent surgeon with twenty years of experience. Twenty years of being right in an operating theatre give him no particular advantage in judging which flat is a good investment.
Show the answer
True
True, and it is easy to doubt. Competence doesn't travel. His circle is surgery, built from thousands of cases with real feedback. Property is a different field with its own ways of going wrong. Successful people are especially at risk here, because being right at work makes them feel right everywhere.
Check yourself
Nasrin needs a used car and knows nothing about engines. She found one she likes, and the seller says it's 'in perfect condition, just serviced'. What is the best move?
- Pay an independent mechanic to inspect it before she agrees to anything
- Watch a few videos tonight about how to inspect a car, then check it herself tomorrow
- Trust the seller: he knows the car better than anyone
- Give up on used cars, since she can't judge them
Show the answer
Pay an independent mechanic to inspect it before she agrees to anything
Right. She borrows a circle from someone with real experience and no stake in the sale. The inspection fee is small next to the price of a bad car.
Check yourself
Match each situation to the best move at the edge
Show the answer
- Signing a long contract full of legal terms → Borrow a circle: have a lawyer read it
- Curious about a new kind of investment → Shrink the bet: only money you could lose
- Choosing a laptop with specs you don't understand → Plain default: the standard, well-reviewed model
- A health article alarms you about a symptom → Ask your doctor, not the comment section
Lesson recap
- Feeling sure is not evidence of knowing; the feeling appears either way.
- You're inside your circle if you can say how things fail, you've had feedback, you can predict, and you know what experts argue about.
- At the edge: say so, borrow a circle from someone with nothing to gain, shrink the bet, or take the plain default.
- Competence in one field doesn't travel to another, but circles grow with practice and honest feedback.