Mauboussin: Thesis-driven investors must pre-define probabilistic signposts to prevent bad deals
Michael Mauboussin · Michael Mauboussin: The Single Biggest Mistake Investors Make In Decision-Making | 20VC #945 · 20VC with Harry Stebbings · Nov 4, 2022 · at 13:38
Michael Mauboussin, Head of Consilient Research at Counterpoint Global, details how investors can systematically counter confirmation bias in thesis-driven strategies.
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“If you do have a thesis, and by the way, I'm not adverse to that, but if you have a thesis, you should be thinking about so-called signposts, which is to say, if this thesis is correct, here are the things that we should see happen as we travel down this road, right? And these signposts are things you should communicate in advance, not as we go, but in advance, And typically write them down and you should write them down specifics with probabilities, right? And so if this is what we should have it. Every time you don't pass a signpost or the signpost is something very different than what you anticipated, that should be a stop point. And the stop point should say, okay, is there a reason for this for reasons? It could be, or should we kill, right? Should we quit what we're doing? And so you, in a sense, you've laid it out in advance. You've laid out the potential problems. You laid out the potential opportunity. And you've, you know, so you're almost, you're pre-committed to changing your course of thought if your thesis isn't unfolding as anticipated, right?”
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