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On using checklists in investing


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On using checklists in finance, an article in the Financial Times


This is an excerpt from Gawande's book. What is particularly interesting is how professional investors--venture and public equity--reject the notion of using checklists.


The researcher's

...most interesting discovery was not the relative success of the airline captains[those who use the checklists, as airline captains do], in fact. Rather, it was that most of his subjects were either... intuitive decision-makers instead of systematic analysts. Only one in eight [VC's]took the airline captain approach. Now, maybe the others didn’t know about the airline captain approach. But even knowing seems to make little difference. Smart published his findings more than a decade ago. He has since gone on to explain them in a best-selling business book on hiring called Who. But when I asked him, now that the knowledge is out, whether the proportion of major investors taking the more orderly, checklist-driven approach has increased substantially, he could only report, “No. It’s the same.”


We don’t like checklists. They can be painstaking. They’re not much fun. But I don’t think the issue here is mere laziness. There’s something deeper, more visceral going on when people walk away not only from saving lives but from making money. It somehow feels beneath us, an embarrassment, to use a checklist. It runs counter to deeply held beliefs about how the truly great – those we aspire to be – handle situations of high stakes and complexity. The truly great are daring. They improvise. They do not have protocols and checklists. Maybe our idea of heroism needs updating.



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