>[!abstract] >A circle of competence is the subject area which matches a person's skills or expertise. The concept was developed by Warren Buffett and Charlie Munger as what they call a mental model, a codified form of business acumen, concerning the investment strategy of limiting one's financial investments in areas where an individual may have limited understanding or experience, while concentrating in areas where one has the greatest familiarity. The strategy emphasizes the importance of aligning one's subjective assessment with actual competence. Buffett summarized the concept in the motto, "*Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital*" ("Wikipedia", 2025). >[!related] >- **North** (upstream): — >- **West** (similar): — >- **East** (different): — >- **South** (downstream): [[Peter principle]]