Capital Allocators – Inside the Institutional Investment Industry

Gary Klein with Paul Sonkin and Paul Johnson – Conducting Pre-Mortem Analysis (Capital Allocators, EP.109)

Sep 23, 2019

Gary Klein, a cognitive psychologist and founder of Shadow Box, is joined by finance experts Paul Johnson and Paul Sonkin. They delve into the Pre-Mortem method of risk assessment, highlighting its origins in the Air Force and its significance in avoiding investment failures. The trio discusses enhancing decision-making through tools like Shadow Box training and Cognitive After-Action Reviews. They critique common risk mitigation techniques and emphasize the necessity of fostering a candid dialogue in teams to improve outcomes and reduce overconfidence.

48:59

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Episode guests

Gary Klein

Paul Johnson

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Quick takeaways

Premortums are a valuable tool for risk assessment and decision-making, encouraging candid discussions and reducing overconfidence.

Premortums contribute to changing organizational culture by promoting transparency, fostering a safe environment, and enhancing teamwork and problem-solving abilities.

Deep dives

The Power of Premortums

The podcast episode discusses the concept of premortums as a powerful tool for risk assessment and improving decision-making processes. The conversation with experts Gary Klein, Paul Johnson, and Paul Sanken explores the effectiveness of premortums in different contexts, including the military, business, and investment decision-making. Premortums involve envisioning a situation where a project or plan has already failed and then identifying the reasons for the failure before it happens. This technique encourages candid discussions, reduces overconfidence, and increases psychological safety within the group. Other risk mitigation techniques such as devil's advocates and red teams are also discussed, but premortums are highlighted as a valuable method due to their ability to bring out valuable insights and enhance group dynamics.

Intro

3min

Exploring Premortem Analysis and Decision-Making Strategies

3min

Navigating Expertise Development in Uncertain Environments

4min

Redefining Decision-Making Through Expertise and Intuition

2min

Enhancing Decision-Making through Scenario-Based Learning

4min

Unlocking Insights with Premortem Analysis

16min

Harnessing Team Insights through Premortem Analysis

19min

Gary Klein is a noted cognitive psychologist with an innate ability to see what others don’t. Over his 40-year career in the field, he’s pioneered the field of naturalistic decision making, the Pre-Mortem method of risk assessment, and the ShadowBox training approach. Gary is the author of five books and editor of three more, and most recently, founded Shadow Box, LLC in 2005 to train decision makers on his technique. You can learn all about Gary at gary-klein.com.

Paul and Paul, you may recall, were guests on the show discussing their book that I greatly enjoyed, Pitch the Perfect Investment. Both are former investors and professors of finance.

Together Gary, Paul and Paul co-authored a paper entitled Rendering a Powerful Tool Flaccid: The Misuse of Premortems on Wall Street. The paper is a detailed look at how properly conduct Pre-Mortem analysis.

Our conversation covers Gary’s background studying expertise with fighter pilots, tools to improve decision-making, including the Shadow Box technique, Cognitive After-Action Reviews, and Pre-Mortems. We then do a deep dive on Pre-Aortem analysis, including its history in the Air Force, what it is, how it works, when it falls short, and the benefits of reducing overconfidence, time efficiency, increasing candor, making groups smarter. We discuss views on other risk mitigation techniques as well, including devil’s advocates, red teams, risk assessment, and critiques.

I found the conversation an incredible door opener to one of the most effective and time-efficient sources of value in improving investment decision-making processes. I’m privileged and excited to share this conversation with you.

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Capital Allocators – Inside the Institutional Investment Industry

Gary Klein with Paul Sonkin and Paul Johnson – Conducting Pre-Mortem Analysis (Capital Allocators, EP.109)

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

The Power of Premortums

Techniques for Better Decision-Making

Benefits of Premortums

Changing Organizational Culture

Remember Everything You Learn from Podcasts