Warren Buffett has imparted his wisdom to us with numerous life, business, and investment quotes over the years.
Some of Buffett's quotes have reached legendary status. Others will cause you to cock your head to the side and utter a "huh!" as you soak in its brilliant simplicity. Take this example from 1984:
There seems to be some perverse human characteristic that likes to make easy things difficult.
That quote came from a speech at Columbia Business School, which the school adapted later into an essay written by Buffett called "The Superinvestors of Graham and Doddsville."
Buffett's quote was meant to shed light on the benefits of value investing, which isn't rocket science if that's your cup of tea. But the example has business applications elsewhere for leaders and entrepreneurs on their career journey.
A simple mental model of success.
Founders and executives often make that mistake -- becoming consumed with making easy things difficult or more difficult than they need to be. They reach a level of success in their "circle of competence" -- where expertise, knowledge, interest, and passion are the focus of their competitive advantage -- and then venture out into other lesser-known areas in an effort to grow the business.
Then it happens: Things that used to be easy become more difficult, many times leading to their demise. In Buffett investing speak, the circle of competence is a simple mental model of success that he has used to avoid problems and dominate in his field. He describes the concept in a 1996 Shareholder Letter:
What an investor needs is the ability to correctly evaluate selected businesses. Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence.
Inside that precious circle lies everything you've mastered throughout your career. Outside the circle are the things of which you have partial knowledge, or no knowledge at all.
The best in the business thrive by putting their focus on their competence and staying in the circle. Warren Buffett's laser focus on his own areas of competence -- his strengths rather than his weaknesses -- has been essential to his success as an investor.
Stay around your spots.
In the book Getting There: A Book of Mentors, Buffett underscores the importance of deciding what business ventures to pursue by quoting Tom Watson (the founder of IBM), who quipped, "I'm no genius but I'm smart in spots and I stay around those spots."
Buffett expands on this point in an excerpt from the book: "My brain is not a general-purpose brain that works marvelously in all situations. There are all sorts of things that I'm no good at and there are all kinds of investment opportunities I'm not able to comprehend. I understand some kinds of simple businesses. I can't understand complicated ones. Coca- Cola, for example, isn't very complicated. It's a durable product and the appeal is universal. I try to find businesses I can grasp, where I like the people running them and think the price makes sense in relation to the future economics."
My own advice, whether in investing, starting a business, or taking on the next phase of life, is no different: Capitalize on what you do best, stay within the boundaries of your strengths and knowledge, and do not stray too far from them. As Buffett has said in the past, if you understand a few things and stick in that arena, you'll do just fine.