Here’s the video – don’t click away after the “Thank you” and applauses because Bill Gates comes onstage and asks relevant questions.

Back to Simoleon Sense: in the “Dear Reader” section for new readers, blog author Miguel Barbosa says he is “blogging to challenge the conventional ‘silo’ approach to learning.(…) I’m a renaissance thinker, an aspiring polymath, and a diligent researcher – as such I believe in the importance of consilience. Successful decision making centers on understanding problems and searching for solutions via a broad frame work of mental models.” - We agree, and given his history and company name, James Simons probably does too.

The video (1h 03min)

We like the way Mr. Simons has built Renaissance and its culture. The MIT host jokes that the world’s best Math and Physics “departments” belong to Renaissance, but that wouldn’t be enough. Mr. Simons highlights that he always wanted to build a company with “the best possible people, no compartmentalization (or “silos” as Mr. Barbosa says), with an open atmosphere, with everyone sharing information and what they’re doing.” That is still not enough: he highlights he’s paranoid about “having the best infrastructure in place – office space, technology, resources – and about paying people very well but based almost exclusively on overall company profit” (to foster collaboration).

He then briefly spoke about his foundation, where he is now full-time (and “busier than ever”), and again the concern with fundamental, basic science is clear. Not surprisingly, the former Math researcher and teacher is very concerned about Math education in the US.

Finally, he closes the talk with 4 “principles”, of which we highlight number 3. That search for the “truth”, for solving problems, for being the first to do something is something we’ve seen in most brilliant and driven people. Unfortunately the Q&A session that follows is mostly rubbish… The principles in summary:

1) Do something new.

2) Collaborate with the best people you possibly can. “Working with these people is FUN”.

3) Be guided by beauty. “(…) it’s a terrific feeling and a beautiful thing to do something right, like solving a math problem“, he says.

4) Don’t give up.

Part 1 of 10 (9:52)

Part 2 of 10 (10:00)

Part 3 of 10 (9:07)

Part 4 of 10 (6:33)

Part 5 of 10 (8:32)

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Part 8 of 10 (8:48)

Part 9 of 10 (6:28)

Part 10 of 10 (7:52)

First, the basics: Dr. Atul Gawande published an “instant classic” New Yorker article called The Checklist in 2007. It’s a must-read, and highlights how another physican, Dr. Peter Pronovost, started using a “stupidly” simple checklist in intensive care units and how that saved lives and money. This was a key insight: procedural complexity had become so mind-boggling that no single “maestro” could be singularly responsible for all steps. Designing a checklist and making sure it was followed achieved enormous results through better execution, oversight and especially communication between a team of now-empowered nurses/other helpers and doctors/surgeons. This initial research has since been expanded to different intensive-care procedures, different areas in hospitals and all this in different geographies in the US – and abroad – in varying social and economic conditions, with encouraging results.

In the words of a NY Times review of the ensuing book, The Checklist Manifesto: “What a powerful insight this is: In an age of unremitting technological complexity, where the most basic steps are too easy to overlook and where overlooking even one step can have irremediable consequences, something as primitive as writing down a to-do list to “get the stupid stuff right” can make a profound difference.”

- An aside: the fact that these simple health care procedures haven’t been adopted elsewhere with the utmost urgency is a clear example of how incentives (in this case, misaligned incentives) and ingrained culture can really bend rational thought and defy logic. Big ships turn very slowly, as the captain of the Titanic certainly would tell us. -

Here’s a quote from another review of the book: “Sometimes a deeply complex problem has a deceptively simple answer.” Definitely. Which is completely different from “a deeply complex problem must have a deceptively simple answer”, which is something the book can inspire since it tries to adapt the original research into other fields. In a podcast with Harvard Business Review, for instance, Dr. Gawande tells us of Walmart’s impressive response to Hurricane Katrina – how central management built a few vital points (a list), then empowered local managers (i.e., allowed for creativity) and demanded constant communication so that the best ideas could be spread (and the worse cut off quickly). He lists more examples and we can certainly think of other complex fields in which checklists should be helpful.

At IP, for instance, we are paranoid about making sure we know every nut & bolt, rule, general procedure and accounting impact of every investment instrument we ever consider negotiating (in that sense, having a global fund for almost 10 years has been terrific). Then we store it and discuss it in our Intranet, and when we do decide to initiate a position in it we start much smaller than we want to – so we can see how it “behaves” in real-life. As Buffett likes to say, “risk comes from not knowing what you’re doing” and checklist approaches in such cases can help.

But even if there weren’t cases where checklists seem inappropriate, there would still be good and bad checklists. In yet another review, there were quotes of Dr. Gawande’s interview with a Boeing expert on pilot checklists:

“There are good checklists and bad… bad checklists are vague and imprecise. They are too long; they are hard to use, and they are impractical. They are made by desk jockeys with no awareness of the situations in which they are to be deployed. (…) They turn people’s brains off rather than turn them on.”

This is a point we’ve made in a very early Buysiders.com post called “Turn off your debugger“: beware of mental crutches… The Boeing guy continues:

“Good checklists, on the other hand, are precise. They are efficient, to the point and easy to use even in the most difficult situations. They do not try to spell out everything.  – a checklist cannot fly a plane . Instead they provide reminders of only the most critical and important steps – the ones that even the highly skilled professionals could miss. Good checklists are, above all, practical.”

It seems like a paradox, but it isn’t: we’ve argued before that good synthesis is as important as far-reaching research in our investment process. In a sense, it seems like we’re searching for a simple solution to a complex problem, but it’s not the case. For a checklist to work, you must have a solution, and in our job there isn’t one – there is no replicable procedure.

We’ll agree with another NY Times book reviewer: “When Gawande writes that an investment manager he knows believes a checklist can help him reliably beat the stock market, the case seems to have been pushed too far.”

While we remain skeptical about checklist approaches “in general”, we took away from the article and the limited time we’ve spent with the book that checklists can help in special situations, perhaps more often than we thought, not because they are helpful per se, but 1) because the process of creating it can be useful and 2) because of what the WSJ Health Care Blog’s reviewer put it so well: “checklists can (…) also remind us to talk to each other and coordinate our activities at particularly crucial junctures.”

IP has learned over 22 years that, when it comes to teamwork, neither individual talent nor diversity of background alone – ultimately no single factor in a group, by itself – is enough to create a high-performance team if the efforts aren’t coordinated (and incentives well aligned, but that’s another story).

Finally, the book also carries with it a deep message about discipline. Big-shot surgeons, top-gun aviators, whatever you are: make sure you’ve taken the right steps, however small they seem, or the consequences may be dire. The “financial instruments” example is in the same vein. That kind of commitment can certainly be transported to other fields.

Here’s a light video of Dr. Atul Gawande at Jon Stewart’s The Daily Show, followed by a 43-minute lecture that’s very comprehensive (the first 10 minutes are taken by the Austrian girl drowning story of the article).

Keep those suggestions coming!

The (weak) analogy would be to relentlessly seek to build up your arsenal of mental models and knowledge – the point is to be better suited/ “fertile” for the associations and “click” moments. Another interesting aspect: much of the “recent” developments in the study of the human brain vs. thought mechanisms involves the use of MRI brain scans – yet there’s no consensus in the scientific community about it being fail-proof in revealing causality (“if this area of the brain ‘lights up’, therefore it’s this mechanism at work”). Perhaps one day it will be demonstrated once and for all that MRI brain scans do reveal what they’re assumed to reveal, but in the meantime there could be some body of science built on sand… And if science has its logical pitfalls, investing is much more crowded with “fake axioms”.

Throughout the other articles in this series, the NYT has included videos, podcasts and even puzzles to illustrate or enrich the discussion. Just don’t forget the 24-hour day axiom!

Monumentally Mistyfying: The series opener. Quick read, not much to highlight but this: “Taking on a brain-teasing challenge ‘is hard-wired into our nature,’ (…) ‘There’s something very deep in human nature that loves to solve puzzles — even small children, before they can read, love taking things apart and putting them back together.’ Take the labyrinth, a mystery that can be embodied in stone or hedge or even bales of hay. It promotes ‘wandering — in a physical and a mental way,’ said Hélène Guenin, a curator of a show on labyrinths coming next September to the Centre Pompidou-Metz in France.” A show on labyrinths? Can’t miss it.

No memory, but he filled in the blanks: About a patient who lost all capability of storing new memory but still loved crossword puzzles – and how it actually helped him cope and learn.

The wizard of crossword puzzles: absolutely soft conjectures, but… “He excelled at math as well as music, abilities that he thinks go together with crossword solving. (…) What they all have in common, he said, is pattern recognition (…) ‘Mathematicians and computer scientists are also constructors.’ Arthur Schulman, a crossword constructor and retired psychology professor from the University of Virginia, who taught a seminar called “The Mind of the Puzzler,” agreed that there is a strong correlation between skill at word puzzles and talent for math and music. All, he said, involve playing with symbols that in and of themselves are not meaningful. ‘There’s an underlying connection, but I’m not sure what it might be,’ Professor Schulman said. ‘It’s finding meaning in structure.’

Crafting the perfect crossword: On creating puzzles – “Like about a third of the puzzling students, Ms. Lucido is a computer science major. ‘A very large percentage of crossword puzzle constructors are into computers or math as professions,’ Mr. Shortz said. He thinks that is because ‘crossword making involves having this huge amount of data and synthesizing it into a grid.’ But constructing puzzles is like writing, too. ‘You want the perfect word,’ he said, ‘le mot juste.’

Why do puzzles at all? – Teller (half of the Penn & Teller duo) writes about why humans subject themselves to the “pain and frustration” of problem-solving. His prose is actually surprisingly good.

The rush of the crossword puzzle moment: Do you learn stuff you didn’t know when doing crossword puzzles, or do you just “recall” what you didn’t know that you knew? Again we go back to the associations and “click” moments that the prepared mind is probably better set to experience.

Video 1:

Video 2:

Video: Quantitative Easing Explained – via The View From the Blue Ridge. The monotone voices in the dialogue start off irritating but contribute to the overall surreal feel of the video – content and looks-wise. Exaggerated as most (good) comedy is.