Gustavo Ballvé on January 6th, 2011
Food for thought, Home, Mental models, Science

Another reader suggestion, this time a first-time contributor. We’ve written skeptically about “checklist approaches” – in corporate governance, for instance. That said, there are situations for which checklists just work – in aviation and project management for decades – and our reader suggested a classic article (and ensuing book) about how the proven power of checklists in some fields (the article’s unassailable example is in intensive care units) can be transported over to many other fields, perhaps all complex fields. We remain skeptical about such widespread application of checklists, but the book has other insights.

First, the basics: Dr. Atul Gawande published an “instant classic” New Yorker article called The Checklist in 2007. It’s a must-read, and highlights how another physican, Dr. Peter Pronovost, started using a “stupidly” simple checklist in intensive care units and how that saved lives and money. This was a key insight: procedural complexity had become so mind-boggling that no single “maestro” could be singularly responsible for all steps. Designing a checklist and making sure it was followed achieved enormous results through better execution, oversight and especially communication between a team of now-empowered nurses/other helpers and doctors/surgeons. This initial research has since been expanded to different intensive-care procedures, different areas in hospitals and all this in different geographies in the US – and abroad – in varying social and economic conditions, with encouraging results.

In the words of a NY Times review of the ensuing book, The Checklist Manifesto: “What a powerful insight this is: In an age of unremitting technological complexity, where the most basic steps are too easy to overlook and where overlooking even one step can have irremediable consequences, something as primitive as writing down a to-do list to “get the stupid stuff right” can make a profound difference.

– An aside: the fact that these simple health care procedures haven’t been adopted elsewhere with the utmost urgency is a clear example of how incentives (in this case, misaligned incentives) and ingrained culture can really bend rational thought and defy logic. Big ships turn very slowly, as the captain of the Titanic certainly would tell us. –

Here’s a quote from another review of the book: “Sometimes a deeply complex problem has a deceptively simple answer.” Definitely. Which is completely different from “a deeply complex problem must have a deceptively simple answer”, which is something the book can inspire since it tries to adapt the original research into other fields. In a podcast with Harvard Business Review, for instance, Dr. Gawande tells us of Walmart’s impressive response to Hurricane Katrina – how central management built a few vital points (a list), then empowered local managers (i.e., allowed for creativity) and demanded constant communication so that the best ideas could be spread (and the worse cut off quickly). He lists more examples and we can certainly think of other complex fields in which checklists should be helpful.

One should always be paranoid about making sure one knows every nut & bolt, rule, general procedure and accounting impact of every investment instrument one would ever consider negotiating (and sometimes you will find that you’ll know more about it than the broker selling the instrument). Another idea is, after research to initiate a much smaller position than one wants to have – so one observes how it “behaves” in real-life. As Buffett likes to say, “risk comes from not knowing what you’re doing” and checklist approaches in such cases can help.

But even if there weren’t cases where checklists seem inappropriate, there would still be good and bad checklists. In yet another review, there were quotes of Dr. Gawande’s interview with a Boeing expert on pilot checklists:

“There are good checklists and bad… bad checklists are vague and imprecise. They are too long; they are hard to use, and they are impractical. They are made by desk jockeys with no awareness of the situations in which they are to be deployed. (…) They turn people’s brains off rather than turn them on.”

This is a point we’ve made in a very early Buysiders.com post called “Turn off your debugger“: beware of mental crutches… The Boeing guy continues:

“Good checklists, on the other hand, are precise. They are efficient, to the point and easy to use even in the most difficult situations. They do not try to spell out everything.  – a checklist cannot fly a plane . Instead they provide reminders of only the most critical and important steps – the ones that even the highly skilled professionals could miss. Good checklists are, above all, practical.”

It seems like a paradox, but it isn’t: good synthesis is as important as far-reaching (breadth and depth) research in one’s investment process. In a sense, it seems like we’re searching for a simple solution to a complex problem, but it’s not the case. For a checklist to work, you must have a solution, and in our job there isn’t one – there is no replicable procedure.

We’ll agree with another NY Times book reviewer: “When Gawande writes that an investment manager he knows believes a checklist can help him reliably beat the stock market, the case seems to have been pushed too far.”

While we remain skeptical about checklist approaches “in general”, we took away from the article and the limited time we’ve spent with the book that checklists can help in special situations, perhaps more often than we thought, not because they are helpful per se, but 1) because the process of creating it can be useful and 2) because of what the WSJ Health Care Blog’s reviewer put it so well: “checklists can (…) also remind us to talk to each other and coordinate our activities at particularly crucial junctures.”

One learns with enough experience that, when it comes to teamwork, neither individual talent nor diversity of background alone – ultimately no single factor in a group, by itself – is enough to create a high-performance team if the efforts aren’t coordinated (and incentives well aligned, but that’s another story).

Finally, the book also carries with it a deep message about discipline. Big-shot surgeons, top-gun aviators, whatever you are: make sure you’ve taken the right steps, however small they seem, or the consequences may be dire. The “financial instruments” example is in the same vein. That kind of commitment can certainly be transported to other fields.

Here’s a light video of Dr. Atul Gawande at Jon Stewart’s The Daily Show, followed by a 43-minute lecture that’s very comprehensive (the first 10 minutes are taken by the Austrian girl drowning story of the article).

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Atul Gawande
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog</a> The Daily Show on Facebook

Keep those suggestions coming!

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