Let Me Save You ~$15,000 With A Simple Mindshift

How To Verify That You’re Outside Your Circle Of Competence

Wordcount: 536
Reading time: 3 to 4 min

When I first started investing I had no idea what I was doing and lost $15,000

I read all the famous books, I watched every YouTube video from Buffett I could find and I read every shareholder letter that was publicly available. I did all the steps that everyone always talks about.

I made myself a list. I knew that I had to:

1. Be a voracious reader. Every legend reads a lot

2. Read lot’s of 10ks. They are the bread and butter

3. Clone other investors and figure out why they made the investment

4. Be dispassionate and rational. Everyone talks about how I need to leave my emotions at the door.

So I started reading about Aluminum companies, costco, coca cola, I read about all the great companies from the past, studied 100 Bagger 10ks to find commonalities, began cloning and …..

Well, I started losing money.

And then I realized that one reason I was losing money is because I was investing in areas outside of my circle of competence.

But I did not know it! I fooled myself

When you are trying to figure out a problem: INVERT

Here is a surefire way to know that you are not in your Circle Of Competence

Another important point is to let your passions and opportunities guide your research.
~ Li Lu

Introducing the Circle Of Passion

Investing requires synthesizing a lot of information. Investing into $UBER requires you to know about:

1. Mobility & Transportation trends

2. Regulations pertaining to Taxi services

3. Autonomous Vehicles, trends and their future

4. Competition in the entire world

5. Freight and Shipping trends

6. Food Delivery

7. Doordash

The list goes on. If you want to be knowledgeable about all of these things, there is only one way to get there:

You must be passionate about the topic

Passion is scientifically proven to improve your information retention, understanding and synthesis. Your reward system is more active when you love what you are reading, which directly influences your desire to learn more.

Passion therefore is proven to increase your understanding of your circle of competence.

Invert Your Circle of Competence

Here is the surefire checklist you should think about all the time when you’re researching, when you’re cloning or when you’re screening.

If the answer to any of these questions is yes, then drop it and move on:

1. Am I bored with what I am reading?

2. Am I often re-reading the same passages over again?

3. Am I getting distracted easily by unimportant things?

4. Are my thoughts drifting, though there’s nothing else major going on in my life?

5. Do I keep thinking about something else to do right now?

6. Would I rather read a different 10k?

If your reading does not pass the Circle of Passion filter you are guaranteed not within your circle of competence.

Check your COP and then worry about your COC.

Everyone should always focus on their strengths and their passions as this is the only way you will be happy and find the motivation.
~Li Lu

What You Should Do Next

I preach this all the time. Keep a journal. Write down:

• what you’re feeling,

• experiencing,

• thinking,

• doing,

• when you’re distracted,

• what topic you were reading when you felt X,

• Write down Everything

Writing it down brings awareness you otherwise often miss. Also scientifically proven by the way. Google it, Check ChatGPT with some deep research it’ll confirm it.

“You cannot improve what you don’t measure”. You do it in the Gym, do it here too.