In order to get the most out of this mental model, we will explore the following:
What is a circle of competence?
How do you know when you have one?
How do you build and maintain one?
How do you operate outside of one?
The difference between the detailed web of knowledge in Lifer’s head and the surface knowledge in the Stranger’s head is the difference between being inside a circle of competence and being outside the perimeter. True knowledge of a complex territory cannot be faked.
How do you know when you have a circle of competence?
Within our circles of competence, we know exactly what we don’t know. We are able to make decisions quickly and relatively accurately. We possess detailed knowledge of additional information we might need to make a decision with full understanding, or even what information is unobtainable. We know what is knowable and what is unknowable and can distinguish between the two.
We can anticipate and respond to objections because we’ve heard them before and already put in the work of gaining the knowledge to counter them. We also have a lot of options when we confront problems in our circles. Our deep fluency in subjects we are dealing with means we can draw on different information resources and understand what can be adjusted and what is invariant.
The depth and Breadth of knowledge:
Breadth is to know the list of topics, to know an array of topics but not in-depth, just the concept, and understanding from a bird-eye perspective.
Depth is to know deeply about any topic or an array of topics.
here in the figure, the red one has lots of circles, that is in a circle of knowledge base there is one topic of a circle which has lots of inner circles, and it is very deep, while other circles are just union or breadth of topics.
A Circle of Competence is the set of topic areas that align with a person's expertise. If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise.
For example, if you know about game theory and behavioral economics, can you assess yourself that you know enough to apply every possible solution to real-life situations, practical application, can you assess and analyze yourself the depth and breadth of the topic that you are applying in real situations.
How do you build and maintain a circle of competence?
One of the essential requirements of a circle of competence is that you can never take it for granted. You can’t operate as if a circle of competence is a static thing, that once attained is attained for life. The world is dynamic. Knowledge gets updated, and so too must your circle.
First, identify your circle and its boundaries.
What topics do you know more about than most people?
What topics do others look to you on?
What are you constantly excited about and learning more about?
Recognize and do self-analysis:
Identify what falls within your circle
Identify the boundaries of your circle
There are three key practices needed in order to build and maintain a circle of competence: curiosity and a desire to learn, monitoring, and feedback.
Curiosity and a desire to learn:
First, you have to be willing to learn. Learning comes when experience meets reflection. You can learn from your own experiences. Or you can learn from the experience of others, through books, articles, and conversations. Learning everything on your own is costly and slow. You are one person. Learning from the experiences of others is much more productive. You need to always approach your circle with curiosity, seeking out information that can help you expand and strengthen it.
Learning from, everything around. When there is a fire to know anything deeply, a person can learn from anything and everything around. Is there a new topic you are excited about? Read everything you can get your hands on. Ask people, read books, the more curios you get the more you grow your knowledge base and circle of competence.
Monitoring:
Second, you need to monitor your track record in areas in which you have or want to have, a circle of competence. And you need to have the courage to monitor honestly so the feedback can be used to your advantage.
The reason we have such difficulty with overconfidence—as demonstrated in studies that show that most of us are much worse drivers, lovers, managers, traders (and many other things) than we think we are—is because we have a problem with honest self-reporting. We don’t keep the right records, because we don’t really want to know what we’re good and bad at. The ego is a powerful enemy when it comes to better understanding reality.
But that won’t work if you’re trying to assess or build your circle of competence. You need to keep a precise diary of your trades if you’re investing in the stock market. If you are in a leadership position, you need to observe and chronicle the results of your decisions and evaluate them based on what you were trying to achieve. You need to be honest about your failures in order to reflect and learn from them. That’s what it takes.
Feedback:
Keeping a journal of your own performance is the easiest and most private way to give self-feedback. Journals allow you to step out of your automatic thinking and ask yourself: What went wrong? How could I do better? Monitoring your own performance allows you to see patterns that you simply couldn’t see before. This type of analysis is painful for the ego, which is also why it helps build a circle of competence. You can’t improve if you don’t know what you’re doing wrong.
Finally, you must occasionally solicit external feedback. This helps build a circle, but is also critical for maintaining one.
A lot of professionals have an ego problem: their view of themselves does not line up with the way other people see them. Before people can change they need to know these outside views. We need to go to people we trust, who can give us honest feedback about our traits. These people are in a position to observe us operating within our circles and are thus able to offer relevant perspectives on our competence. Another option is to hire a coach.
How do you operate outside a circle of competence?
Part of successfully using circles of competence includes knowing when we are outside them—when we are not well equipped to make decisions. Since we can’t be inside a circle of competence in everything when we find ourselves, Strangers, in a place filled with Lifers, what do we do? We don’t always get to “stay around our spots.” We must develop a repertoire of techniques for managing when we’re outside of our sphere, which happens all the time.
There are three parts to successfully operating outside a circle of competence:
Learn at least the basics of the realm you’re operating in while acknowledging that you’re a Stranger, not a Lifer. However, keep in mind that basic information is easy to obtain and often gives the acquirer unwarranted confidence.
Talk to someone whose circle of competence in the area is strong. Take the time to do a bit of research to at least define the questions you need to ask, and what information you need, to make a good decision. If you ask a person to answer the question for you, they’ll be giving you a fish. If you ask them detailed and thoughtful questions, you’ll learn how to fish. Furthermore, when you need the advice of others, especially in higher stakes situations, ask questions to probe the limits of their circles. Then ask yourself how the situation might influence the information they choose to provide you.
Use a broad understanding of the basic mental models of the world to augment your limited understanding of the field in which you find yourself a Stranger. These will help you identify the foundational concepts that would be most useful. These then serve as a guide to help you navigate the situation you are in.
conclusion:
Critically, we must keep in mind that our circles of competence extend only so far. There are boundaries in the areas in which we develop the ability to make accurate decisions. In any given situation, there are people who have a circle, and who have put in the time and effort to really understand the information.
It is also important to remember that no one can have a circle of competence that encompasses everything. There is only so much you can know with great depth of understanding. This is why being able to identify your circle, and knowing how to move around outside of it, is so important.