What is the Checklist Manifesto?

For generating excitement and anticipation, Atul Gawande’s The Checklist Manifesto is found wanting. The premise of the book – that by resorting to humble checklists, mistakes can be reduced, and efficiency increased – must have had prospective publishers yawning.

Thankfully, at least one stayed awake long enough to commission the book, though, because it’s a glorious celebration of how implementing processes that may seem humdrum can help us overcome human cognitive frailty. And if I ever start teaching a degree course in betting, it will be the first book on the new-student summer reading list.

Gawande – a surgeon and medical professor – traces the origins of checklists, exploring several examples in diverse fields, like aircraft flight and the construction industry, where complexity and risk combine to mean that humans need checklists if they are to avoid calamitous mistakes.

The central narrative of the book is Gawande’s own attempts to develop a surgical checklist for the World Health Organisation, where he makes a compelling case for the fallibility of human beings (even the most highly trained, the sort you would find in an operating room) and the need to put in place the processes and procedures to curb that fallibility.

How does it relate to Punters?

For punters, perhaps the most interesting section explores how a few fund managers have developed their own checklists for managing potential investment pipelines. The examples are persuasive. Gawande recounts how Charles Munger (a long-time associate of the granddaddy of investment, Warren Buffett) once failed to assess the revenue stream security of a furniture leasing company – a relatively obvious area to be sure of if investing millions of dollars in a company – with financially disastrous results.

Gawande goes on to explore what some investors refer to as cocaine brain. Making money, according to neuroscientists, stimulates the same cognitive pleasure centres as snorting coke.

For investors, this presents a problem: any sniff of profit can see them behaving erratically and with destructive exuberance. Rather than taking pause, they barrel headlong into the deal, unable to control the surge of pleasure. Punters will recognise this behavior. When you think you’ve found a winning bet, the seduction of imminent profit makes it hard to pause to consider its true value.

Gawande’s neat explanation of the emotional drivers of investors reads like a summary of the various cognitive shortcomings we have investigated in these articles, and he goes on to offer what could easily be a concluding sentence for any of them, arguing that “serious investors”, when they feel this irrational surge, “try to become systematic”, focusing on “dispassionate analysis.”

Finding Resistance

One particularly instructive case study is that of investor Mohnish Pabrai. Studying as many investments as he was able to – his own and others’ – he made a list of all the mistakes he was able to identify.

He used these to create a checklist: a series of steps that he would ensure were carried out accurately to prevent the same mistakes occurring in future, such as checking the company’s mandatory stock disclosures to see if any shareholders close to the company had recently sold shares. Pabrai’s checklist allowed him to process investments more efficiently and profitably than he had before.

All the way through Gawande’s exploration – and in his own attempts in developing his surgical checklist – he finds resistance. After all, highly skilled people don’t need reminding to complete simple tasks, do they? It seems they do. Using his own checklist in surgery, he tells of the countless occasions where the new process picks up mistakes, allowing the surgical team to rectify them before a catastrophe occurs, such as the failure to administer antibiotics within the required timeframe before an operation, for example.

The reticence and resistance to the adoption of checklists that Gawande finds are to be expected. I would be sceptical. After all, I haven’t gained years of experience and developed complex and detailed analytical models to need to resort to some remedial checklist to improve my punting. Have I?

Small Margins

When challenging that reaction in myself, though, the conclusion is humbling. Because when I think about the times I’ve made poor betting decisions, they are nearly all the result of simple, preventable mistakes. I don’t tend to make many errors when engaged in the more technical and complex parts of the work – like building the models that produce the data that drive most of my punting decisions – presumably because my mind is completely focused on what I find a cognitively difficult task. No, I err on the simple stuff.

For example, on two occasions recently I’ve failed to check the market for the best odds before placing bets; on another I didn’t update my Elo ratings after a round of a tennis major; and I frequently visit markets to review the odds before creating my own tissue prices, which I know is a direct route to poor punting choices.

None of these are examples of earth-shattering mistakes which have seen me lose thousands on the turn of a card; they are not extravagance or recklessness. In each case, it has been easy for me to move on and forget my lapse. They are examples of marginal errors, occasions where more discipline would have led to taking fractionally higher odds, or to a wiser choice of bet. In punting, though, it is these margins that result in long-term profit.

Recording Mistakes

There have been mistakes with more significant losses, though. At the end of last year, I placed a large bet on a horse, the biggest stake my model allows. Its odds were $4.00, but according to my ratings, it should have been $2.00. The odds-on favourite was weak and overvalued by the market, and it was difficult to make a case for any of the other runners. My cocaine brain was fully primed.

When the horse lost – trailing in behind the rest of the field – it was a blow. I’ve done this long enough to know that losses happen. In fact, when betting on horseracing using my models, more horses lose than win. That’s to be expected; it’s the long-term value and profit that’s important, not the win-rate. But the magnitude and manner of this loss hurt.

Carrying out a post-mortem on the result, I did a news search on the trainer’s name to see if that provided any explanation. It turns out some of the stable’s horses had a virus, and whilst they thought that day’s runners were healthy, they were naturally nervous. That information was freely available to the market, but I’d missed it.

I’ve started a project to record these kinds of mistakes. I’m going back through my betting record and, where I can remember my failings, am noting down new items for a checklist. Some parts are easy – like the steps I go through to update my ratings spreadsheets. These are unlikely to save me any money but, in haste to complete the task, I often make mistakes which means I need to revert to previous versions and start again. The checklist will save me time.


In some instances, though, better bets will be made, and some poor bets avoided. Going back through my betting record is a chastening experience. For all my claimed experience and expertise, I reckon around one in 15 bets last year involved an error of some sort: a failure on my part to do something, or an easy-to-rectify misjudgment, which led to a loss, or reduced profit.

Hindsight is an unreliable barometer of many things but if there was a checklist to have caught all the errors I’ve identified, I estimate last year’s profit would have been over 15 per cent higher.

Punting is not high-stakes surgery, nor is it building sky-scraping monoliths that need to withstand earthquakes, nor is it a plane navigating potential disaster at 30,000 feet; but it feels like the humble checklist has a place on the desks of punters, just as it does in operating rooms, on construction sites, and in cockpits. I’ve started to construct mine, and I suggest you do too.

Every time you have that pang of guilt after a bet – that feeling that your actions weren’t the smartest – scribble down the question on a checklist that would have made you make a different decision. It might save your future-selves from its cocaine brain.

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