“Knowledge is power.” —Francis Bacon
Knowledge is Power, and Farnam Street is the Street where Warren Buffett Lives
Farnam Street’s The Knowledge Project is Shane Parrish’s podcast where he “interview[s] people from across the globe to deconstruct how they think, live, and connect ideas. The core themes will seem familiar to Farnam Street readers: Decision Making, Leadership, and Innovation.”
In the third episode of the Knowledge, Shane Parrish talks to Professor Sanjay Bakshi on reading, mental models, worldly wisdom, checklists and investing.
To listen to the interview, click here.
To read the transcript, click on the image below or here.
Transcripts are provided for all podcast interviews, and available via signing up for a membership over at Farnam Street.
Checklists: Sanjay Bakshi’s Wisdom
One of the subjects discussed by Shane and Sanjay in the interview is checklists. In his answer to Shane’s question Sanjay elaborates on how to think about checklists.
[Shane Parrish] And for Charlie, and for you, you can probably just mentally go through this list. How do you feel about checklists, or how do you make sure you have thought about things from— it seems like ever since Atul Gawande’s book The Checklist Manifesto there’s been a movement not only in the value investing community, but a movement in hospitals, a movement to go back to—maybe the airlines are doing something right: maybe the low fatalities and the very methodical approach to things has an advantage. How do you make sure that you’re capturing all the mental models that you have? And bringing them to bear on a particular problem?
[Sanjay Bakshi] When you think about checklists, I think what you’re trying to do is to reduce your rate of error. And there’s a trade-off here. I think what Atul Gawande has done – he’s done a marvellous service to civilisation by giving us a framework for how to reduce error. And it doesn’t have to be domainspecific. It could be flying a plane, as he talks about in Chapter 1 in that book. It could be about running a hospital operation. It could be also be about running an investment operation.
But all of that is focussing on how to reduce error. But that’s just one aspect of it. Because reducing error is not always the most optimal thing to do. You also have to be creative. If you’re going to be creative, you’re going to make mistakes. If you look at any business which has been innovative, you’ll find that they have made mistakes. So there are two things here: you need to have the framework to create insights, which means you need to have a creative mind-set, which means that you should be willing to experiment, and sometimes make mistakes. At the same time, when you’re actually making big decisions, you also need to have a framework to reduce error. I think Atul Gawande’s work, and the movement that he has created that you are referring to, deals very well with that aspect. It doesn’t deal at all with the idea that you want to be creative. You need both. You need to have the ability to have unique insights. And you also need to have the ability to reduce your error rate.
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned.
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