Archives for December, 2007
Medicine today has entered its B-17 phase. Substantial parts of what hospitals do—most notably, intensive care—are now too complex for clinicians to carry them out reliably from memory alone. I.C.U. life support has become too much medicine for one person to fly. Yet it’s far from obvious that something as simple as a checklist could be of much help in medical care [...] Pronovost and his colleagues monitored what happened for a year afterward. The results were so dramatic that they weren’t sure whether to believe them: the ten-day line-infection rate went from eleven per cent to zero. So they followed patients for fifteen more months. Only two line infections occurred during the entire period. They calculated that, in this one hospital, the checklist had prevented forty-three infections and eight deaths, and saved two million dollars in costs.
Checklists do seem like a remarkably simple way to improve performance of a process as complicated as critical care. Checklists (or more complex algorithms) help to address both individual cognitive limits (attention, short-term memory) and problems in social organization (reluctance to challenge hierarchy). If a checklist is good, I wonder whether a more complicated decision-support system is better – ie. one where the checklist items are dependent on the observed data. Such a system might be harder to implement, and perhaps harder to convince people to use, which could outweigh a slight improvement in performance. Moreover, rather than guiding actions, the greatest bang-for-the-buck of a checklist is in preventing critical errors and oversights.
This got me thinking about potential under-appreciated applications of checklists in other high-risk endeavours, such as investing and trading. Many people have processes for screening and selecting stocks with greater and lesser degrees of rigor. Externalizing a process into a checklist makes it easier to execute in a disciplined manner Indeed, there is already someone selling a software package called Checklist Investor, which comes with a set of checklists outlining investing workflows such as Graham’s Intelligent Investor. One can take the algorithm-driven approach to its logical extreme and use pure quant strategies, but there’s clearly a place for art and instinct in investing, just as there is in the ICU. I think that there is a potentially useful distinction between using algorithms for the constructive part of a process (such as stock selection), and using them as checks to avoid situations that could turn into major disasters — and avoiding those major disasters can have an enormous effect on performance.