10 Ways to Improve Your Investment Process – #10. Continuously Improve

The tenth idea I’ll leave you with is to seek to continuously improve your process.

The best coaches, the best CEOs, the best investors all religiously do this.

One of Nick Saban’s assistant coaches, who was with him at LSU in 2000, re-joined him after ten years apart. The assistant coach was asked how Saban’s process had changed. He responded, “It’s been polished. Coach knows what he wants to do. That’s why he’s been so successful.”

In an interview with ESPN, Paul DePodesta, distanced himself from the notion that his baseball process as described in Moneyball was limited to using statistics to identify and draft undervalued ball players. Rather, he defined his process in much broader terms which could be applied whether you’re running a sports club or a hedge fund.

According to DePodesta, “It’s a constant investigation of stagnant systems, to see if you can find value where it isn’t readily apparent. It can be anything. At the time, it happened to be using statistics to make us better decisions. That’s not always the case. There are new frontiers we need to conquer.”

One final example of continuous improvement is that of value investor Mohnish Pabrai – a disciple of Warren Buffett and Charlie Munger. Pabrai uses a checklist to capture investment mistakes that have been made by great investors. Pabrai scoured their past investment letters and holdings looking for mistakes. In some cases, it was easy because the investors acknowledged the mistake and explained why it happened. In other cases, he had to find the mistakes on his own and deduce why they happened.

Pabrai currently has more than seventy items on his checklist which he credits for improving his performance and avoiding mistakes.

I think this is a powerful way to improve – and to keep improving. Create a checklist of all your investing mistakes and then add to it as you come across mistakes made by other investors.

In the words made famous by Nike, “Just Do It!”

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One thought on “10 Ways to Improve Your Investment Process – #10. Continuously Improve

  1. Arthur Clarke

    A comment that is appropo here is one made by Charlie Munger in his early 80s: “If you haven’t overturned a long-held view in the past year you haven’t been thinking.”


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