The Checklist Manifesto_ How to Get Things Right - Atul Gawande [69]
I asked Cook how much interest others have had in what he has been doing these past two years. Zero, he said—or actually that’s not quite true. People have been intensely interested in what he’s been buying and how, but the minute the word checklist comes out of his mouth, they disappear. Even in his own firm, he’s found it a hard sell.
“I got pushback from everyone. It took my guys months to finally see the value,” he said. To this day, his partners still don’t all go along with his approach and don’t use the checklist in their decisions when he’s not involved.
“I find it amazing other investors have not even bothered to try,” he said. “Some have asked. None have done it.”
The resistance is perhaps an inevitable response. Some years ago, Geoff Smart, a Ph.D. psychologist who was then at Claremont Graduate University, conducted a revealing research project. He studied fifty-one venture capitalists, people who make gutsy, high-risk, multimillion-dollar investments in unproven start-up companies. Their work is quite unlike that of money managers like Pabrai and Cook and Spier, who invest in established companies with track records and public financial statements one can analyze. Venture capitalists bet on wild-eyed, greasy-haired, underaged entrepreneurs pitching ideas that might be little more than scribbles on a sheet of paper or a clunky prototype that barely works. But that’s how Google and Apple started out, and the desperate belief of venture capitalists is that they can find the next equivalent and own it.
Smart specifically studied how such people made their most difficult decision in judging whether to give an entrepreneur money or not. You would think that this would be whether the entrepreneur’s idea is actually a good one. But finding a good idea is apparently not all that hard. Finding an entrepreneur who can execute a good idea is a different matter entirely. One needs a person who can take an idea from proposal to reality, work the long hours, build a team, handle the pressures and setbacks, manage technical and people problems alike, and stick with the effort for years on end without getting distracted or going insane. Such people are rare and extremely hard to spot.
Smart identified half a dozen different ways the venture capitalists he studied decided whether they’d found such a person. These were styles of thinking, really. He called one type of investor the “Art Critics.” They assessed entrepreneurs almost at a glance, the way an art critic can assess the quality of a painting—intuitively and based on long experience. “Sponges” took more time gathering information about their targets, soaking up what ever they could from interviews, on-site visits, references, and the like. Then they went with what ever their guts told them. As one such investor told Smart, he did “due diligence by mucking around.”
The “Prosecutors” interrogated entrepreneurs aggressively, testing them with challenging questions about their knowledge and how they would handle random hypothetical situations. “Suitors” focused more on wooing people than on evaluating them. “Terminators” saw the whole effort as doomed to failure and skipped the evaluation part. They simply bought what they thought were the best ideas, fired entrepreneurs they found to be incompetent, and hired replacements.
Then there were the investors Smart called the “Airline Captains.” They took a methodical, checklist-driven approach to their task. Studying past mistakes and lessons from others in the field, they built formal checks into their process. They forced themselves to be disciplined and not to skip steps, even when they found someone they “knew” intuitively was a real prospect.
Smart next tracked the venture capitalists’ success over time. There was no question which style was most effective—and by now you should be able to guess which one. It was the Airline Captain, hands down. Those taking the checklist-driven approach had a 10 percent likelihood of later having to fire senior management for incompetence