Buffett’s circle of competence idea has probably done more damage to investors than almost anything else he’s said. He’s not wrong, but it’s so often misused.

I hear/read ‘that’s outside my circle’ all the time, as if the circle is fixed. Learning is not optional in this business and I think this phrase is used a crutch to avoid putting in the work to understand something or learn something new.

There are definitely businesses that belong in the ‘too hard’ pile, but too hard usually has to do with asymmetry, an unmanageable range of outcomes, or an inability to assign probabilities with any confidence, not whether something can be understood. Most business models are ultimately understandable with enough effort. They’re not abstract math problems.

The only way to expand the circle is to start outside of it. Unless you were born of railroad lineage, or had some specific industry expertise prior to becoming an investor, every great investor once moved from uncertainty to clarity over time. You don’t want to declare permanent exclusion at first sight.

The goal isn’t to stay inside a small circle forever. The goal is to expand it deliberately and try to be honest about what you understand and don’t understand.