What I Learned From Complications: A Surgeon’s Notes on an Imperfect Science
/In 2002, Atul Gawande wrote Complications: A Surgeon’s Note on an Imperfect Science.
It reveals what most doctors know, but will never admit: medicine is an imperfect, mistake-filled process, far from the idealized world doctors would like it to be.
Investing is no different. Like surgery, investing is imperfect, no matter how data-driven, hyperrational, and supersmart we are. Gawande explains how to handle the imperfections, the mistakes, the guesswork, and the uncertainty.
Gawande is a world-renowned surgeon and multiple time best-selling author. He’s published several books subsequently, including The Checklist Manifesto, Better: A Surgeon’s Notes on Performance, and Being Mortal.
Investors can learn a lot about investing from areas specifically outside of investing. Look, I’ve learned a lot from Buffett, but there’s only so much I can digest before it starts to sound the same.
Start learning outside the industry.
Here are the 8 lessons to learn from the book:
Lesson #1: Develop Great Investors
Professors say every two or three years they’ll see someone truly gifted come through a program—someone who picks up complex manual skills unusually quickly, sees the operative field as a whole, notices trouble before it happens. Nonetheless, attending surgeons say that what’s most important to them is finding people who are conscientious, industrious, and boneheaded enough to stick at practicing this one difficult thing day and night for years on end.
The obsession should be developing great talent, not finding it. Most organizations don’t have a chance to attract the absolute best, so you have to be good at developing it. I don’t have a chance of finding the top 1% of naturally-gifted investors. But I think I can take someone in the top 10-15% and develop their skills to be successful.
Lesson #2: The Intangibles Can’t Be Taught
Skill, surgeons believe, can be taught; tenacity cannot.
Equity and credit analysis can be taught. So can manager due diligence and asset allocation. Skills are easy to teach, but it doesn’t make an investor great.
What can’t be taught is the ability to handle uncertainty and ambiguity. The ability to make decisions with incomplete information. The ability to see investments go bankrupt or the market implode yet still retain your sanity and rationality. The ability to work with different personalities. The ability to see a strategy through even though everyone else has given up.
Lesson #3: Learning Never Stops
You do get good at certain things, my father tells me, but no sooner than you do, you find what you know is outmoded. New technologies and operations emerge to supplant the old, and the learning curve starts all over again. “Three-quarters of what I do today I never learned in residency,” he says.
This is, in fact, the experience all surgeons have. The pace of medical innovation has been unceasing, and surgeons have no choice but to give the new thing a try. To fail to adopt new techniques would mean denying patients meaningful medical advances. Yet the perils of the learning curve are inescapable—no less in practice than in residency.
Learning is not done once you complete your undergrad, MBA, or CFA. You don’t get to just start showing up for the last 30 years of your career.
Skill degradation in investing is scary because you can exist for decades as your ability dwindles, but you never know it.
Lesson #4: Mistakes Will Happen – Accept It and Move On
What I felt was shame: I was what was wrong. And yet I also knew that a surgeon can take such feelings too far. It is one thing to be aware of one’s limitations. It is another to be plagued by self-doubt.
One surgeon with a national reputation told me about an abdominal operation in which he had lost control of bleeding while he was removing what turned out to be a benign tumor and the patient had died. “It was a clean kill,” he said. Afterward, he could barely bring himself to operate. When he did operate, he became tentative and indecisive. The case affected his performance for months.
Investors will make mistakes. And with the curse of hindsight, people will wonder what you were ever thinking. It’s part of the job. You can’t avoid it by resolving to outwork or outsmart mistakes. It’s inevitable, so accept it and move on.
Lesson #5: The Illusion of The Single Explanation
When things go wrong, it is usually because a series of failures conspires to produce disaster.
We love simple answers to complex problems. It’s convenient, it provides closure, and it let’s us move on. When there is an issue, it’s never just one issue. If you really want to solve it, you need to dig for the root causes, which will end up revealing a cascading path of issues. It’s never that simple or easy.
Lesson #6: Normalize Mistakes
Getting open, honest reporting is crucial. The Federal Aviation Administration has a formalized system for analyzing and reporting dangerous aviation incidents, and its enormous success in improving airline safety rests on two cornerstones. Pilots who report an incident within ten days have automatic immunity from punishment, and the reports go to a neutral, outside agency, NASA, which has no interest in using the information against individual pilots.
One way to ensure that your organization never learns is to punish mistakes. People respond to incentives. If they are punished for admitting mistakes, the mistakes don’t go away, they just get buried. So be careful what you wish for.
Normalizing mistake reporting doesn’t mean you encourage mistakes. Or tolerate deliberate acts of misconduct. It’s simply the realization that mistake punishment is worse than the mistake itself.
Lesson #7: Medicine, Like Investing, Is All About Uncertainty
The core predicament of medicine—the thing that makes being a patient so wrenching, being a doctor so difficult, and being a part of a society that pays the bills they run up so vexing—is uncertainty. With all that we know nowadays about people and diseases and how to diagnose and treat them, it can be hard to see this, hard to grasp how deeply uncertainty runs. As a doctor, you come to find, however, that the struggle in caring for people is more often with what you do not know than what you do. Medicine’s ground state is uncertainty. And wisdom—for both patients and doctors—is defined by how one copes with it.
No one ever admits how uncertain investing is. Investing is full of gamesmanship, posturing, and ego.
The key, as Gawande states, is coping with uncertainty, not eliminating it. Acknowledge its existence and move forward.
Lesson #8: Medicine, Like Investing, Is All About Guesswork
We look for medicine to be an orderly field of knowledge and procedure. But it is not. It is an imperfect science, an enterprise of constantly changing knowledge, uncertain information, fallible individuals, and at the same time lives on the line. There is science in what we do, yes, but also habit, intuition, and sometimes plain old guessing. The gap between what we know and what we aim for persists. And this gap complicates everything we do.
Like uncertainty, guessing is part of every investor’s process. We just can’t admit it. So we call it assumptions, projections, or the “art” part of the “art and science” of investing.
Every profession has a certain level of guesswork. Investors need to get over it. Don’t fool yourself. Being a great investor and guessing are inseparable.