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How do we stay safe in the skies? We have implicit trust in the pilots who fly us from A to B. No doubt they are highly skilled, highly trained individuals but they also have another secret tool in their pilot hats (pun intended); they follow checklists. Pilots must adhere to a series of steps, procedures and processes as part of their pre-flight routines. There are also checklists to follow during flight as well as checklists to follow for any number of scenarios, however unlikely, should they occur whilst in the sky. Every different plane make and model will have a tailored checklist, for which airlines may tailor further to better suit their own operations.
During WW2, in conjunction with Boeing, the US Air Force first developed a checklist for the B-52 bombers, which subsequently had a major impact upon the outcome of the war. Pilots, however, are not alone in using checklists. Experts within the medical field have adopted this mindset to great effect. The author of this book, Atul Gawande is a US based surgeon whom grabbed the notion of a checklist and turned it into a global study to see the results of implementing simple procedural checklists within surgical theatres. The results showed a material improvement in outcomes. Gawande himself speaks of his personal experiences where the checklists he follows has literally saved the lives of his patients. He also discusses tips for a successful checklist including keeping it simple and not too long.
The world of equity markets is full of all sorts of investors, emotions and companies. Some of the most highly regarded value investors, such as Mohnish Pabrai, have seen the benefits a checklist can provide in other expert professions and implemented their own versions to better run their investment process. Fundamentally a checklist is a process to minimise the likelihood of mistakes and errors occurring, should aid in narrowing the variance of possible outcomes and perhaps most importantly provide the most appropriate solution in a time of crisis. This is precisely the way to improve your chances of long-term success when investing.
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