Collection: Charlie Munger - #68 'Circle Of Competence'


Video Link: https://youtu.be/4nFw-zHYGrY


In this episode, Charlie Munger was asked how did he identify his circle of competence?


In this episode, you’ll learn:

  • Why is it important to know your circle of competence?

  • 2 good reasons for not investing.

To check out all Collection: Charlie Munger <click here>

[Transcript]

(Source: https://youtu.be/X1Oi3esiry8)

AUDIENCE MEMBER 00:08

Hi Mr.Munger.


CHARLIE MUNGER 00:09

Yeah.


AUDIENCE MEMBER 00:10

You talked about identifying your circle of competence and trying to expand it. I’m at a point in my life where I'm wondering what my circle of competence is, so I would like to know how you found yours?


CHARLIE MUNGER 00:22

I didn't catch that either.


AUDIENCE MEMBER 00:26

You talk about your circle of competence and you should stick to it and try to expand it.


CHARLIE MUNGER 00:31

Oh yeah, well. It’s a hugely important thing, knowing the edge. It’s hardly a competence if you don’t know the edge of it.


You know, if you have a misapprehension regarding your own competency that means you lack competence, you’re going to make terrible mistakes. I think you’ve got to constantly measure what you achieve against other people of achievement, and you have to keep being determinedly rational, and avoiding a lot of self-delusion.


But after a lifetime of observing it, I think the tendency to be pretty rational about one’s own competency is largely genetic. I think people like Warren and I were just born this way. Now it took a lot of education. But I think we were born with the right temperament to do what we did. And I have no way of taking you back and rebirthing you.


AUDIENCE MEMBER 01:40

Why is there so little health care in Berkshire portfolio. And I mean, isn't there something that – could you comment on that?


CHARLIE MUNGER 01:49

I think we don’t understand it well enough and we don’t like a lot that we do understand. Those are two pretty good reasons for not investing.

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