CHECKLIST ANYONE?

"Checklists seem able to defend anyone, even the experienced, against failure in many more tasks than we realised." Atul Gawande

"A checklist is no substitute for thinking." Warren Buffett

"Charlie [Munger] is possibly without peer when it comes to the checklist of atypical investment factors he considers and his deep fluency in the diverse disciplines from which they are drawn." Peter Kaufman

“It is also essential for a thinking man to assemble his skills into a checklist that he routinely uses. Any other mode of operation will cause him to miss much that is important.” Charlie Munger

“Before I make the final decision to buy any stock, I turn to my checklist in a last-ditch effort to prevent my unreliable brain from overlooking any potential warning sign that I might have missed.” Guy Spier

"Boeing just doesn't sit around in a room and come up with the checklist for take-offs. That has been created over 60-70 years of failures that have caused things to make the checklist. Our investment checklist was designed the same way. I looked at mistakes I made since the time I invested and I looked at mistakes that other people made that I respect like Warren Buffett and Charlie Munger, LongLeaf Partners and so on. When I look at mistakes, I would figure out what was the reason the investment lost money and was that reason visible at the outset? Was it visible before the investment was made. And, in most cases it's extremely obvious." Mohnish Pabrai

“The only antidote for being an absolute klutz due to the presence of a man with a hammer syndrome is to have a full kit of tools. 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.” Charlie Munger

"Why are checklists so effective? We think we're very smart; we take shortcuts, especially in investing. We get euphoric about all the money we're going to make, and we are just a mix of rationality and emotions. We see a great undervalued business, we ask ourselves a bunch of questions, but we don't go through a systematic process of looking at every nook and cranny to figure out whether we got it right or not." Mohnish Pabrai

“We’re just starting a process now, it’s funny I have it in my hand. This is a pilot’s checklist for a certain type of plane. And what we’re starting to institute at our firm is for every function, including the investment function, to have a daily checklist.” Bruce Berkowitz

“Investing and the checklist. Not Rocket Science. Pretty obvious. Start with the stuff we’ve learned from Graham, Buffet, Munger, Klarman, Fisher, Templeton etc .. margin of safety, moats, simple businesses .. make a real Checklist. Examine all your mistakes that led to permanent loss of capital – the plane crashed. Add to the checklist.” Mohnish Pabrai

“In investing too, the real purpose of a checklist is to serve as a survival tool, based on the haunting remembrance of things past.” Guy Spier

“My checklist is.. is it cheap?, is it a good business?, who is running it?, and what did I miss? I go through all the checklist. When I go to ‘what did I miss?’ .. it is hugely important to understand psychology and human cognition.” Li Lu

“We believe there are questions to which every responsible capital allocator should know the answer, so we’ve developed an investment committee memo framed to address all of our core investment values. It’s not a brainless exercise of box checking, but meant to ensure that the analysis gets done in the way that we’ve learned over time should produce high quality results.” James Chrichton

"No wise pilot, no matter how great his talent and experience, fails to use a checklist." Charlie Munger

"Any student of value investing is well aware of the various behavioural biases to which investors are subject, but the sad reality is that awareness doesn't preclude you from succumbing to them. Every item on our checklist is meant to remind us of previous lessons learned and expose any biases we may have on a particular investment." Christopher Begg

"The power of simple checklists should not be under estimated." James Montier

"One of my key investing tools is a checklist of 98 or so items that help me avoid bad stock picks (most gleaned from mistakes the very best investors on the planet have made). My list was copied from the famed checklist the Federal Aviation Administration mandates to keep airline crashes to a minimum." Monish Pabrai

"If you're trying to analyze a company without using an adequate checklist, you may make a very bad investment." Charlie Munger

"We have multiple checklists and processes in place to improve how we think and make decisions." Ken Shubin Stein

"We're big believers in checklists, which are the best tools available to reduce preventable human errors." Joel Hirsch

"The checklist has prevented many investments that may not have been prevented otherwise. It is one of those things where it doesn't take much effort, but delivers a huge reward, and I like that." Mohnish Pabrai

"...all investors can benefit by keeping an investment journal and using checklists in doing their research. These two very simple tools not only will help keep people focused on their goals and sticking with their strategy, but they will also help them avoid mistakes out of impulse. They will also protect investors from some of the cognitive biases to which we are all subject. In the checklist, it’s possible to put not only the steps necessary to do the research as well as lists of mistakes or problems that occurred in the past and should be avoided, but also a list of cognitive biases. This allows the investor to check with him or herself and to think about whether there are forces at play that may be activating some cognitive biases, and if so, to consider those." Ken Shubin Stein

“My good friend, Guy Spier, observed that both of us have a pre-investment checklist, but no in-flight checklist. The pre-investment checklist has proven invaluable. However, it is not enough to just keep up with ongoings in existing investments in an ad hoc manner. It is important to periodically run and re-run the in-flight checklist.” Mohnish Pabrai

“I’m a great believer in solving hard problems by using a checklist. You need to get all the likely and unlikely answers before you; otherwise it’s easy to miss something important.” Charlie Munger

"The checklist we have got created in a very holistic manner in the sense that I did not just add questions on the checklist on a blue sky basis. I looked at the mistakes either I made or other great investors made and I asked if it was obvious before the investment was made that it would not work. In many cases it was obvious. Then I asked what is the question that should have been asked before this investment was made? For example, when Warren Buffett bought Dexter Shoes the question is, "Can it be impacted by cheap labour in China?," or for US Airways, "Can unions have an impact" or "Does the structure of the airline industry ... ?

These questions were ad hoc, but later when I created all the questions and I started to categorize them into different buckets, what surprised me is that they fell very nicely into about five different categories. There's quite a few questions related to leverage that cause problems for companies. There's a number of questions related to moats, sustainable advantage, brands, etc., so that was another category. There was whole category on management ownership which has a bunch of questions. When we looked at the management and ownership section there's a number of questions, some related to the size of the ownership stake how are they compensated, are interests aligned, what's the past track record, how long has the team been together, those kinds of things. There's a number of questions that come up in that section that are absolutely fundamental. In fact, many times that is the section where I end up having to go back and do more research because I end up not knowing the answer to many of those questions the first time I run it. Usually those are the ones that I tend to naturally miss and go back and figure out after the fact. Capital allocation is fundamental - there's a whole bunch of checklist questions on that as well." Mohnish Pabrai

"You need a different checklist and different mental models for different companies. I can never make it easy by saying, 'Here are three things'. You have to derive it yourself to ingrain it in your head for the rest of your life." Charlie Munger

"I'm a prolific maker of lists, and the more trouble I had in the early 1990s, the more I attacked it and dealt with it by making lists and checking off items as we accomplished them." Sam Zell

“Both Warren and I feel it’s our moral duty to be as rational as we can possibly be. A lot of people who are brilliant in some ways tend to make these utterly asinine decisions in other ways. We both tend to collect the asininities of the world in a kind of checklist. And we try to avoid everything on the checklist.” Charlie Munger
 

Further Reading:
‘Building an Investment Checklist - Part 1,’ Investment Masters Class. 2017.
‘Building an Investment Checklist - Part 2,’ Investment Masters Class. 2017.