First Principles and Circle of Competence

Before we venture into the different mental models, it is important to take a step back and think about what mental models actually are. Mental Models are an expression of our thought process and our perception of the world. Why do we make one decision over another? Why do we interact the way we do with the world around us? It is important to have this self-awareness and overcome the different biases that might creep in. In the series of articles, I will share some of the notes that I had made on different models and biases. Let's get started!

In the first article of the series, we will discuss brief notes and salient points about First Principles Thinking and Circle of Competence.

First Principles Thinking

When faced with complex situations that confound us or doing something for the very first time, thinking from first principles helps in decision making. First principles are like axioms - fundamental facts on which we base our further knowledge. We cannot derive them from other principles - they stand on their own.

Some examples of first principles - the laws of motion, the laws of thermodynamics, etc. You might have a complex product - but the first principle is to make something people want. A Masterchef knows the first principles of flavour profiles and can conjure new recipes from limited ingredients. Thus, first principles thinking allows us to do frugal innovation. When we don’t know the first principles of cooking, we would be dependent on recipes.

They are two systems that can help us in developing the first principles thinking:

• Socratic Questioning: This is a system where we ask basic questions and try to examine our thinking and assumptions consciously. Some questions we ask are - Why do we think this will happen? How do I know that the assumption is valid? What are the consequences of being wrong? How do we know we are right?

• The Five Whys: Children always think from first principles and ask multiple questions. And we typically shoot them down with something like ‘I told you so’. Ask ourselves questions up to 5 levels - I.e. for every reason we give, ask another why. At any point, if we are unable to provide a proper explanation, we can deduce that we made a wrong assumption. Why do we design the product this way - the customers would love it. Why would the customers love it - it reduces their pain. Why would our product reduce their pain compared to others - and so on.

Circle of Competence

For early employees, while figuring out which problems need to be solved, it is essential to understand our circle of competence. We can’t be the best in everything - there are areas in which we are incredibly competent, and there are other areas where our knowledge is surface level. A few areas are quite intuitive, and a lot of us have a clear understanding of how things work. Other areas require specialised knowledge which takes more time to accumulate.

So how do we understand if we have a circle of competence? Think of the following three points:

• We have an unfair advantage, i.e. we know something that the majority of people don’t know - the insider insights.

• We have a few learnings under our belt through failures. If we haven’t failed even once, then we are not in the circle of competence.

• We know precisely what we know and what we don’t know. This helps us to mark our circle of competence.

After we know what our circle of competence is, we need to tune and develop it further through the following steps:

• Develop a curiosity and a burning desire to discover something new about our field.

• Do a regular self-assessment of where we are in our aptitude levels and see how we have progressed.

• Have peers/mentors regularly provide feedback and identify areas of improvement.

At times we have to operate outside our circle of competence. In those situations, we must do the following:

• Learn the basics of the new field quickly.

• Talk to experts in the new area and probe them with thoughtful questions to get useful insights.

• Use the mental models to navigate the field. Critical thinking helps to make correct calls in unfamiliar situations.

References:

First Principles Thinking, Farnam Street Blog, Apr 2018

Circle of Competence, Farnam Street Blog, Dec 2013