#1
Know the Edge of Competence
"Knowing what you don't know is more useful than being brilliant. If you know the edge of your competence, you're way ahead of the pack."
Recognizing your limitations is a strength.
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Charlie Munger⭕ Circle of Competence
Charlie Munger's Circle of Competence Rules
Charles Thomas Munger (January 1, 1924 – November 28, 2023) was an American businessman, investor, and philanthropist. He served as vice chairman of Berkshire Hathaway and was Warren Buffett's closest partner for over five decades. Munger was renowned for his multidisciplinary approach to investing, advocating for the use of mental models from various fields including psychology, economics, physics, and biology....
3 principles·Circle of Competence
3 Key Circle of Competence Principles
#2
Understanding Business Essence
"It's remarkable how much long-term advantage we've gotten by trying to understand the essence of a business."
Deep understanding of a business's essence reveals opportunities invisible to surface-level analysts.
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Circle of Competence
"Know your circle of competence and stay within it. The size of that circle is not very important; knowing its boundaries, however, is vital."
Knowing the boundaries of your expertise is more valuable than the expertise itself.
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What are Charlie Munger's key circle of competence principles?
Charlie Munger has 3 key principles on circle of competence. The most important one is "Know the Edge of Competence" — Knowing what you don't know is more useful than being brilliant.
How does Charlie Munger apply circle of competence in practice?
Charlie Munger applies circle of competence through several key principles including "Know the Edge of Competence" and "Understanding Business Essence". These principles guide practical investment decisions and have been tested across decades of market cycles.
What makes Charlie Munger's approach to circle of competence unique?
Charlie Munger's approach to circle of competence is distinguished by a focus on long-term thinking and fundamental analysis. With 3 specific principles in this area, Charlie Munger provides a comprehensive framework that investors at any level can study and apply to improve their decision-making.
