Buffett & Munger: Know The Edge Of Your Own Competency

Buffett & Munger: Know The Edge Of Your Own Competency

Tom Watson said “I’m no genius, but I am smart in spots and I stay around them.” Learn from the most successful investors in the world about how they think differently and how important it is that they understand their own limits of knowledge, skill and competency.

Warren Buffett & Charlie Munger: Circle Of Competence

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REITChilton Capital's REIT Composite was up 6.1% last month, compared to the MSCI U.S. REIT Index, which gained 4.4%. Year to date, Chilton is up 6.3% net and 6.5% gross, compared to the index's 8.8% return. The firm met virtually with almost 40 real estate investment trusts last month and released the highlights of those Read More

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Q4 hedge fund letters, conference, scoops etc


I don't worry about things I don't understand. I mean I think it was Tom Watson senior said I'm a genius but I'm smart and spots and I stay around those spots. There's a lot to that. Knowing your circle of competence is where that perimeter is enormously important there is all kinds of things I can do and there's plenty of companies I can analyze but I don't have to worry about that.

Well I don't know why Apple's going down. I know enough about it so I admire the place but I don't know enough to to have an opinion about why it's going up or down recently. Part of our secret is that we don't attempt to know a lot of things. We have a I have a pile at my desk that solves most of my problems. It's called the too hard pile and I just keep shifting things to the too hard pile. And every once in a while an easy decision comes along and I make it. That's my system. Everything was the too hard pile except for a few easy decisions which I make promptly we're just trying to have that uncommon sense. I'm talking about and part of our common sense is to refer a lot of the stuff to the too hard pile.


One of my favorite lines from you is you want to hire the guy with the IQ of 130 that thinks it's 120. And the guy with an IQ of 150 who thinks it's 170 will just kill you. You must be thinking about who you are most.

Well I don't but that humility means you know the edge of your own confidence. Yes. And you aren't arrogantly stepping over the boundary.

I'm very good at that. But with me in my area of competency. My best friend and I adore me for my humility. Yeah well I'd read to find humility is knowing what you don't know. Yes well both Warren and I are very good at that. One of these guys at the Berkshire meeting from one of the foreign publications. Said quite a couple of guys in a little place in Omaha do so much better than all these powerful minds and great institutions. And I said Well I think Warren and I know the edge of our confidence better than other people do. And. That's humility umbrella sense of that is a very important thing to know. I say over and over again. It's not a competency if you don't know the edge yet what. You were a disaster. If you don't know the edge of your own competency why frequently says I'd rather deal with the guy. With an IQ of 130 who thinks it's a 125 guy with an IQ of 180 that thinks it's 200. That second guy will kill you. And. And so it is very important to know the edge of your own competency.

A place like Berkshire Hathaway. We've done better than average and now there's a question why has that happened. And the answer is pretty simple. We tried to do less. We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about Khensu in aerospace and utilities and so on and so on. We never had that. We never thought we could get really useful information on subjects like John Kramar produce it tends to have. An. And we always realized. We worked very hard we can find a few things where we are right. The matter is that not everybody can learn everything.

Some people are way better and of course no matter how hard you try there's always some guy that needs more some guy or gal and the have just so what do does any of us need to be the very top of the whole world. It's ridiculous. It isn't that we were so good at doing things that were never. We were golden voiding things that were typical finding things that are easy.

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