Play to Your Strengths: Understanding the Circle of Competence

Want to make smarter choices? Learn this game-changing concept.

I am not good at packing up the car.

If we need to load up luggage for a trip, help someone move, or pack up the car after a big Costco trip, I am not your guy. If you go with me, odds are good you will ride home with the Talking Rain at your feet and bags of chips in your lap.

My wife, on the other hand, is a packing master. She spent her formative years playing hours of Tetris and sees a pile of things and a confined space as a fun challenge—a puzzle to be solved.

When she’s done, you can go right from Costco to Lowe's just because you can.

Packing cars is firmly in her wheelhouse. Which brings us to this week's topic: the concept of the "circle of competence." We'll unpack (see what I did there?) what it means, why it matters, and how you can use it to play to your strengths and make smarter choices.

What is the Circle of Competence?

Much like my wife's uncanny ability to transform our car into a real-life game of Tetris, each of us has areas where we excel. This is the essence of the circle of competence—a mental model that helps us recognize where our true strengths lie.

Popularized by investing legends Warren Buffett and Charlie Munger, this concept represents your personal knowledge comfort zone. Inside this "circle" are the things you genuinely understand—your expertise and hard-earned skills.

For example, our kids know better than to come to me if they need help packing, finding something, or getting a splinter out (all of which are some of my wife’s many specialties). But they do come to me when the internet is down, they want to talk Friends or Community, or they need a sarcastic comment.

This concept isn’t just for individuals—it’s crucial for businesses too. Take my old job for instance. As a company, our circle of competence was squarely in the realm of technology, trivia, and creating engaging, knowledge-based entertainment. We’d shine when we would stick to creating fun, challenging content that tests and expands people's knowledge.

However, there was a time when we ventured outside this circle. A dozen years ago or so, we acquired PicPlz, an early competitor to Instagram. While it seemed like an exciting opportunity at the time, it was far removed from our core competencies. It may not shock you to learn that this foray into photo-sharing didn't really pan out, and we eventually shut it down. It was a valuable lesson in recognizing and respecting our circle of competence. When we play to our strengths, we thrive. When we don't... well, let’s just say the company didn’t go on to become one of the world’s biggest social networks.

But here’s the thing: the size of your circle isn’t what matters. It’s knowing where your boundaries are. As Buffett put it, "The size of that circle is not very important; knowing its boundaries, however, is vital."

When you operate within your strengths, you’re in your element. The true power of this concept isn’t just about showcasing what you know—it’s about having the humility to admit what you don’t.

Now that we've defined the Circle of Competence, you might be wondering: Is this circle set in stone, or can it expand? After all, we're not static beings – we're constantly learning and evolving. This brings us to our next crucial question…

To Grow Your Circle or Not?

Let's dig into the pros and cons of expanding your circle versus deepening your existing expertise."

Understanding your circle of competence is just the beginning. The next step is deciding what to do with this knowledge. While it’s tempting to think that expanding your circle is always the best option, that’s not always the case. The key is to make strategic decisions about where to focus your energy.

Your circle isn’t fixed; it can grow and evolve over time. However, this growth should be intentional and aligned with your goals and interests. Often, the most effective strategy is to deepen your expertise within your existing circle rather than trying to broaden it too much.

When considering whether to expand, ask yourself:

• Is this area aligned with my long-term goals?

• Do I have the time and resources to develop genuine expertise in this area?

• Will this expansion complement my existing strengths?

Again, the goal isn’t to have the largest circle but to have a well-defined and valuable one. Sometimes, the smartest move is to recognize your boundaries and collaborate with others whose strengths complement your own.

Applying the Concept

Putting this model into practice involves three key steps: identification, decision-making, and action.

1. Identification: Clearly define what lies within your circle. This requires honest self-assessment and, ideally, should be based on actual data and past performance rather than just your perception of your abilities.

2. Decision-making: When faced with a challenge, assess whether it falls within your circle. If it does, you’re well-positioned to handle it. If it doesn’t, you have three main options:

   1. Pass: Choose not to engage if it’s not critical or aligned with your strengths.

   2. Learn: Invest time and resources to expand your knowledge.

   3. Outsource: Collaborate with or delegate to someone who has the required expertise.

3. Action: Once you’ve made your decision, act decisively within your strengths or according to your chosen strategy for challenges outside of them.

Self-awareness is crucial here. It takes courage and humility to define and communicate the boundaries of your competence. But doing so builds trust and credibility. There’s power in being able to say, "This isn’t my area of expertise, but I know someone who can help."

Conclusion

Remember, this concept isn’t just about you. Identifying and respecting others’ circles is equally important. This awareness allows you to build more effective partnerships and collaborations, where diverse strengths complement each other.

By consistently applying this model, you can make more informed decisions, focus your efforts effectively, and build stronger, more productive relationships in both your personal and professional life.

So, embrace your strengths and be proud of your expertise, whether it’s in technology, car packing, or knowing how many claps are in the Friends theme song (it’s four, by the way). And when it comes to areas outside your comfort zone, it’s not only okay but admirable to say, "I don’t know, but I’d love to learn."

After all, that’s how your circle can grow—one humble admission and curious question at a time. And who knows? Maybe one day, with enough practice, I’ll be able to pack a car without turning the backseat into a snack bar.

Until then, I’ll stick to writing newsletters and leave the packing to the experts.

Ever forward.
— Derek (aka Chief Rabbit)

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