Are you in your circle of competence?

Warren Buffett once said: “What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

And I think that this is true for life. Most people are smart. But only in the areas that they know well. They should avoid playing in areas that they don’t know very well.

But you see this all the time. People can get sucked into pursuing the more exciting opportunity because it sounds “sexy”. They leave their circle of competence.

The problem is that once you’re out of the circle, you can’t rely on your skill. You need a lot of luck to help you. You’re effectively gambling.

So my question to you is: Are you feeling lucky?

Otherwise, stay inside your circle and do what you know you can do. And do it well. Forget all of the distractions outside of that circle.