The Checklist
About a week ago, I came across an interesting article called The Checklist on the blog Street Capitalist. The piece, from the New Yorker, was about a doctor who, through the use of checklists, was able to dramatically improve the critical care unit of Johns Hopkins Hospital.
Today, I posted a Reflection on the other blog to which I contribute; Reflections on Value Investing, referencing the article and a ridiculously applicable quote from Charlie Munger. I would highly recommend you all read through the referenced article not only because I say so but because it’s truly in your best interest.
I’ve contemplated, and will soon begin working on, a (hopefully) complete investing checklist that I can run potential investments through to check for errors and holes in my analysis. I’d hope that, over time, the checklist is improved, refined, and finally, engraved in my brain. Until then, I believe it’ll be useful to literally have the list written down and ready for reference. I’d recommend you all do so as well, if not on paper then in your brain. I think it is amazing that simply going down a list of necessary steps and checks can improve nearly any process, including investing.
One of Charlie Munger’s most elementary pieces of advice for investors and thinkers is to utilize checklists when ever possible, as a way to improve cognitive ability and minimize errors. In a 2003 speech to UC Santa Barbara Economics, Munger put it thusly:
You don’t have just a hammer. You’ve got all the tools. And you’ve got to have one more trick. You’ve got to use those tools checklist-style, because you’ll miss a lot if you just hope that the right tool is going to pop up unaided whenever you need it. But if you’ve got a full list of tools, and go through them in your mind, checklist-style, you will find a lot of answers that you won’t find any other way.
In December of 2007, The New Yorker ran an article about a doctor, a man named Peter Pronovost, who introduced some simple checklists to the intensive care unit at Johns Hopkins Hospital, a simple move that yielded extraordinary results:
The researchers found that simply having the doctors and nurses in the I.C.U. make their own checklists for what they thought should be done each day improved the consistency of care to the point that, within a few weeks, the average length of patient stay in intensive care dropped by half.
The checklists provided two main benefits, Pronovost observed. First, they helped with memory recall, especially with mundane matters that are easily overlooked in patients undergoing more drastic events. (When you’re worrying about what treatment to give a woman who won’t stop seizing, it’s hard to remember to make sure that the head of her bed is in the right position.) A second effect was to make explicit the minimum, expected steps in complex processes. Pronovost was surprised to discover how often even experienced personnel failed to grasp the importance of certain precautions. In a survey of I.C.U. staff taken before introducing the ventilator checklists, he found that half hadn’t realized that there was evidence strongly supporting giving ventilated patients antacid medication. Checklists established a higher standard of baseline performance.
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