Analysing your IQ
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Know what you know, know what you don’t know, and make high-stakes bets only inside your competence.
Circle of Competence isn't just theory—it's a practical framework for better decisions. This page explains how it works and how to apply it.
Define where you have real understanding versus surface familiarity. Delegate or learn before acting outside the circle.
The power of Circle of Competence comes from its ability to compress complexity. A good mental model acts like a lens—it brings the important features into focus.
A great software engineer may still make poor investments in biotech without domain expertise.
Use Circle of Competence when facing complex decisions with multiple variables. It's especially powerful when conventional wisdom seems wrong or when you're operating in unfamiliar territory.
Over-applying: Not every problem benefits from this model. Match the tool to the situation.
Under-applying: People learn the model but don't practice it. Application takes repetition.
Misunderstanding the principle: Surface-level understanding leads to poor execution. Study the examples.
Ignoring context: The same model works differently in different domains. Adapt accordingly.
Identify a current decision you're facing. Write down the assumptions you're making. Challenge each one.
Look at a past failure. Apply Circle of Competence retroactively—would it have changed the outcome?
Teach the model to someone else. If you can't explain it simply, you don't understand it well enough.
Set a reminder to apply this model once per week for the next month. Track the results.
No single model handles every situation. Build a toolkit of complementary frameworks.
Mental models require specific cognitive traits to execute. Do you have the Purpose for this?
Know what you know, know what you don’t know, and make high-stakes bets only inside your competence.
Define where you have real understanding versus surface familiarity. Delegate or learn before acting outside the circle.
A great software engineer may still make poor investments in biotech without domain expertise.
Use Circle of Competence when facing complex decisions in the strategy domain, when conventional approaches aren't working, or when you need a structured framework for analysis.
Circle of Competence is used by strategic thinkers, business leaders, and anyone who needs to make high-stakes decisions under uncertainty. It's particularly popular in investing, startups, and engineering.
Yes. Mental models are learnable skills, not innate talents. The key is deliberate practice—actively applying the model to real decisions, not just reading about it.