Warren Buffett: Only 5-10% of Companies Fall Within My Circle of Competence

In this interview with Yahoo Finance, Warren Buffett reflects on his admiration for Jeff Bezos, praising his visionary execution in transforming Amazon from a bookseller to a massive enterprise. Buffett acknowledges that certain innovations, like Microsoft or Netscape, fall outside his “circle of competence,” so he doesn’t regret missing them.

However, he considers his biggest mistakes to be overlooking opportunities within his expertise. Buffett estimates that only about 5-10% of companies fall within his ability to evaluate effectively. This focus on understanding and staying within his strengths underscores his disciplined investment philosophy, emphasizing the importance of recognizing one’s limitations and learning from missed opportunities.

Here’s an excerpt from the interview:

Buffett: I always admired Jeff. I met him 20 years ago or so, and I thought he was something special. But I didn’t realize you could go from books to what’s happened there. He had a vision and executed it in an incredible way– something that would not have–

But there’s a lot of games I’ve missed. I would’ve missed Microsoft, even if I’d gotten to know Bill earlier or something. Those just aren’t my games. I don’t worry about the things that I miss that are outside my circle of competence of evaluating.

I have missed things that were within my circle, and that’s a terrible mistake. Those are my biggest mistakes. You haven’t seen them. It’s not a mistake because I missed Netscape or something like that at all. I would say that maybe 5% of the companies or 10% of the companies, at most, are within an area of my circle of competence, there’s something I should be able to understand.

You can watch the entire interview here: