Finding the Edges of your Competency

Charlie Munger is an American lawyer, investor, and philanthropist. He’s also vice chairman of Warren Buffet’s Berkshire Hathaway, and the billionaire’s long-time business partner.

He writes: “People chronically mis-appraise the limits of their own knowledge. That’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.”

“You are a disaster if you don’t know the edge of your competency.”

So here are 10 things (Courtesy Alan Steel) to help you set the edges:

  1. Right now cash pays nothing.
  2. Expect market volatility.
  3. One competitor is enough to ruin a business running on small margins.
  4. The consensus is not king.
  5. Just because information is right in front of you that doesn’t make it more important.
  6. Don’t hunt for stuff just to confirm what you already think is true.
  7. You can’t link a single piece of market information with another and call it “the future”.
  8. Bull markets can make bad strategies look good…for a while.
  9. There’s no such thing as a truly wealthy day trader. Get advice.
  10. The world did not end. Please continue with your day.

In the words of Morgan Housel at The Motley Fool: “At least half of what we see in life is unnecessary complication masquerading as added value.”

Learn to tell the difference by getting some good financial advice.

It could make you wealthier.

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