You're Not Supposed to Be Good at Everything - Circle of Competence - Future IQ

4,216 views Wait, is this logic right? • Jun 27, 2025

Slog Reference: Circle of Competence

Description

Warren Buffett didn’t build his fortune by knowing everything he built it by knowing what not to touch. In this episode of Future IQ, we dive into one of the most underrated mental models: the Circle of Competence.
What exactly is your circle of competence? Why does knowing your limits make you more effective, not less? And how can this simple idea help you avoid bad decisions, wasted time, and unnecessary stress not just in your career, but in your personal life too?
We explore powerful real-life examples from Ted Williams’ precision on the baseball field to Buffett’s famously disciplined investing and unpack how understanding your strengths can lead to better outcomes in work, relationships, and decision-making.
You’ll also learn how your Circle of Competence connects to your Circle of Influence the area where you may not be an expert, but still have the power to create change. And how knowing where your influence ends can help you stop overthinking, overcommitting, or taking on battles that aren't yours to fight.
If you’ve ever felt stretched too thin, second-guessed your choices, or struggled with where to focus your energy, this episode offers a clear mental framework to think sharper and live smarter.

More Videos:
How The World Choose To Be Incompetent: https://youtu.be/tvDs-rEF37s
Chat GPT Can Make You Dumb Or Smart: https://youtu.be/McdWSLWQUkA
Why Idiots Think They Are Smart?: https://youtu.be/GtmcY3t5hB4
A cow on a golf course taught me how to deal with unfairness in life: https://youtu.be/77_YwP9aok8

00:00 - Warren Buffett's Secret
00:23 - What is the Circle of Competence?
01:03 - Example: Ted Williams
01:53 - Example: Steve Jobs & Apple
02:56 - Example: A Personal Anecdote
03:50 - Fingertips Feeling
04:39 - What if I don't have a Circle of Competence?
05:01 - Comparative Advantage
07:33 - The Circle of Influence
09:24 - What about the world outside your influence?
10:00 - The 97/3 Principle
12:24 - The Serenity Prayer
13:08 - Concluding Quote by Tom Watson Sr.

Hope you enjoyed FutureIQ by Navin Kabra and Shrikant Joshi. Do hit us up on Twitter:
@ngkabra http://twitter.com/ngkabra
@shrikant https://twitter.com/shrikant

Refernces & Credits:
https://modelthinkers.com/mental-model/circle-of-competence
FarnamStreet article
https://squareallworthy.tumblr.com/post/163790039847/everyone-will-not-just

Listen it on the podcast provider of your choice: https://tapthe.link/FutureIQRSS

Related Slog Matches

Circle of Competence

Manual

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Transcript

- How did Warren Buffett become one of the richest people in the world, Shriant? Because he knows what stocks to invest in. More important, he knows what stocks to not invest in. And most important, he knows which stocks he doesn't understand and you should just stay away from even if they're going to make a lot of money. This last idea which he has talked about repeatedly is called staying within your circle of competence. Circle of competence is this like the domain in which you have abilities like stockpicking for Warren Buffett. Right?

0m 33s But the more important aspect of this is that you should know your abilities. Okay. Okay. And there are some things you are good at and then some things you are bad at. Yeah. So if you draw a circle around you and keep all the things you're good at inside the circle and everything you're bad at is outside the circle, that's your circle of competence and you should limit your activities, the important activities to inside your circle. Okay, I'll give an example from Warren Buffett himself. Okay, he talks about Ted Williams, one of the greatest hitters in the history of baseball. Okay, what Ted Williams did was do a very detailed study of his hitting, baseball hitting, and he broke

1m 19s it down into 77 different segments, types of hitting. Okay? And for each one, he analyzed which things he's good at, which ones he's not good at. Okay? And out of those 77, just the ones he's good at, that was his circle of competence. And he would take a swing only in those cases. and the others he would let go. Wow. Okay. Because of using this concept of circle of competence, Ted Williams became one of the greatest hitters ever. Right. Yeah. Another lovely example is from Apple.

1m 55s Okay. Okay. In the 1990s, Steve Jobs was not running Apple. He had been kicked out. Yeah. Okay. And after that, Apple was doing badly. We all thought Apple is going to shut down at some point. Yeah. Then Steve Jobs came back and what Steve Jobs did was bring Apple back into its circle of competence. He looked at Apple's offerings. He realized that in addition to what Apple normally does, which you and I all know what it is famous for, it was doing things like enterprise software. It was doing things like software licensing. It was doing all kinds of options in their software, right? This menu, that menu and all that. Steve Jobs said this is not Apple.

2m 38s This is not our circle of competence. He got rid of all of that and just focused on the few things that Apple does well and not giving people too many options. Right. Yeah. That has made Apple one of the most successful companies ever. Circle of competence. Absolutely. And final example I want to use from my own life. Okay. In early 2000s, I was working for a large software company and I was an individual contributor. Okay. Then at some point they made me a manager. Okay. 6 months into doing that I realized I hated this. I'm not very good at it. And then I had a choice.

3m 17s Either I learned to become a good manager or I mean some people just muddle through. Yeah. Okay. But I chose to stay in my circle of competence. I voluntarily gave up that and went back to being an individual contributor and I've been very happy with that decision. Yeah, I was almost afraid the Peter principle would come into effect here, but he's smart. He did not come to the Peter principle. Good job, Naven. Good job. But what you just explained about the circle of competence makes me wonder if the circle of competence is essentially the domain where we develop fingertips feeling which we just spoke about. Well, fingertips feeling is a much more advanced concept, right? Within your

4m 01s circle of competence, there is a much smaller subset where you are so competent and you are doing it so often that you develop an instinct for it in the lower layers of your brain. System one. Uh, and that's fingertips feeling, right? So, if I'm drawing circles, fingertips feeling would be a very small circle. Circle of competence will be a larger circle where you do things not necessarily through instinct. You might take a lot of time doing it. It might be hard for you, but you can get it done.

4m 30s Right. Competence isn't that it has to be easy for you. It is just that it is possible for you to do it. Ah, important nuance. Yeah. Yeah. All right. But what if I don't have a circle of competence? What you really mean is what if my circle of competence is very small. Right. There is pretty much nobody who doesn't have some circle of competence. Right. Okay. Because circle of competence doesn't mean that you're better at it than everybody else. It is just that you are competent at it. Okay.

4m 59s Let me give an example which really comes from economics called comparative advantage. Okay. I won't describe it in detail but simply suppose Sachin Tendulkar is a very good cook. Okay. Do you think it's a good idea for Sachin Tendulkar to practice batting as well as cooking? Obviously not. No. It makes sense for Sachin and Endulkar to pay someone else to cook. Even if that person isn't as good a cook as Sachin Dulkar, right? So yeah, I mean that cook might feel very bad that he has no circle of competence because Sachin is better than him at everything. But he does have a circle of competence which is cooking, right? And Warren Buffett again says that the size of the circle

5m 43s is not very important. Knowing its boundaries, however, is vital. Ah, keep your eye on that part. All right. So, how do I identify this boundary? As in how do I identify what falls inside the boundary inside the circle of competence? Far more important is to identify what falls outside. Okay. Knowing what you can't do is important. Okay. But you're right, this is tricky. Okay. Uh because Dunning Krueger effect plays a role. Okay. Yeah. We've done an episode on it. Put links in the description. Check it out. So the point is that if you are incompetent, you will not realize you are incompetent, right?

6m 21s So how do you deal with that? One is have objective measures, right? There is a number which cannot be gamed and then you know are you better or worse than that. Okay. Another important thing is have fair but tough third parties who will tell you are you competent in this or incompetent. Right? The same concept comes in deliberate practice also which we talk about quite a lot. So these are things you can do to understand your circle of competence. Yeah, I can see the importance of having like a coach, a mentor who can tell you, listen, you might like football, but you're not good at football, so stay away from football, which is why I'm not playing football

7m 00s these days. Not that I ever did. But does this mean that I should always stay within my circle of competence and never go outside of it? Not really. Because if everyone in India had done this 100 years ago, we would never have gotten independence. Right? The independence movement was not within anyone's circle of competence. Okay? Right? So sometimes it makes sense to go a little outside. Okay? But outside that circle is things I'm bad at. Right? So I need to draw one more circle around it. Okay? I'm going to call it the circle of influence.

7m 36s Okay? So fingertips feeling circle of competence circle of influence right. So circle of influence is where you can't do something but you can influence other people who can do something or you can influence other people so that together you can do something right interesting. The second one is what happened in the freedom movement, right? People talked, they collected like-minded people together and they formed groups and then slowly that group together could do something even though one person could not have done anything like that. So getting freedom was not within the circle of competence of any one person.

8m 14s True. But as a group they could do it. But if it was not within anybody's circle of competence, where does it come within the group? because the sum is greater than the parts and also probably there has to be someone in the group who has a circle of competence of bringing a group together and keeping it together and so on right but main point being that one person didn't have this in their circle of competence but there is a circle of influence which is larger where you can bring in other people I'll take a simpler example please right there is bad traffic outside my house and I need to do something about it But absolutely not in my circle of

8m 54s competence to do anything about it. Yeah. But if I happen to know someone with a lot of influence who can talk to the local corporator, it is within the circle of competence of the corporator to do something about it. Ah, so it's not within your circle of competence, but there is someone within your circle of influence whose circle of competence intersects with your circle of influence. Correct? Ah, okay. Interesting. So there is fingertips feeling there is circle of competence and then there is circle of influence and outside that is the whole wide world you know I would say most of the world is in that category and all the things that people get worked up about are

9m 33s usually outside even the circle of influence right okay examples like freedom struggle and all that might be trotted out but keep in mind that there is no point in whining about something unless you're going to do something about it okay complaining ing on Twitter is useless unless you have 100,000 followers, right? Then it becomes circle of influence thing. Okay. True. True. We keep talking about the 973 principle, right? 97% of the things you should just let go. Only 3% you can decide to take action but then you have to put in serious efforts. Okay. Now let me give some examples of outside the circle of competence, circle of influence. Right?

10m 17s the deer, rabbit and zebra they get together and they pass a resolution that lions should become vegetarian because a lot of people complaining sound like that. Okay, here is a lovely quote. If your solution to some problem relies on if everyone would just then you do not have a solution. It's not a solution. Yes, everyone is not going to just. Okay. At no time in the history of the universe has everyone just, right? And they're not going to start now, but I wish they do start just commenting and responding and subscribing and liking and sharing. I know it's a tall ask, but please. So on Twitter, I once pointed out that, you know, you should care about your grammar

11m 00s and your spelling. Okay? And someone else validly pointed out that just because someone's grammar and spelling is bad doesn't mean that they are dumb. True. Which I agreed with. M but still you have to care about your grammar and spelling because a lot of people in positions of power who can give you jobs and who can give you work and so on for them grammar and spelling is important. Yeah. And when I say this people reply but those people should just should just stop taking grammar and spelling so seriously. And the point is those people are outside your circle of competence.

11m 37s Those people are outside your circle of influence. The only one in your circle of competence is you. You can improve your spelling. And if there is a student who does actually listen to me, then circle of influence, I should tell them to improve their spelling and grammar. Right. Yeah. And if you are willing to listen to the student, then the student can make this exhortation. Naven, please don't worry about my spelling and grammar. And maybe he will listen. But then again, that's up to him. And no, but I am not the one giving jobs, right?

12m 07s That person is going out into the world and he can't get all the managers in the world to start caring about this. Even if he gets a job, he can't get all the customers to start caring about this. That's the point I want people to understand. Fair enough. Fair enough. So basically what it boils down to is learn the serenity prayer and uh implement implement it in your everyday life. It will help you. What's the serenity prayer? God grant me the courage to change the things within my circle of competence, the serenity to accept things which are outside my circle of influence and the wisdom to know the difference. Okay, this is a variant of

12m 45s the original serenity prayer. But I love this variant more than the others. And if something is outside your circle of influence, you can probably try and bring it first within your circle of influence, then little more into your circle of competence and maybe into fingertips feeling. that that is applicable only if it falls within the 973 split that he spoke about. I want to end with a quote by Tom Watson senior the founder of IBM. He said I am no genius. I am smart in spots but I stay around those spots. Ah those spots being the circle of competence.

13m 21s And if you're wondering why we keep talking about 97% and 3%, there is an episode we did called a cow on a golf course changed my life and we line it up for you next. Go check it out. Sri Kant Naven Future IQ.