From " A checklist for investors"
An itemized list of procedures and how to follow them, the surgeon Atul Gawande has written, can "hold the odds of doing harm low enough for the odds of doing good to prevail."

Decades' worth of psychological studies show that people are extremely good at figuring out which information they need for a decision—but do a poor job of using that evidence methodically over time

As the Nobel Prize-winning psychologist Daniel Kahneman's book "Thinking, Fast and Slow" puts it, "Humans are incorrigibly inconsistent in making summary judgments of complex information."

-Rub your nose in your own failures," he urges. "Avoiding the mistakes you've made in the past will take your error rate way down in the future."

Mr. Pabrai says he believes that the flubs made by great investors fall into five groups: valuation, or how cheap an investment is; leverage, or risks associated with borrowing; management and ownership; "moats," or how well-fortified business are against competition; and personal biases.

First he does all his other research; then he works through the checklist to make sure he didn't miss anything.

Among the questions on Mr. Pabrai's list: How good is management at allocating capital? Is cash flow overstated because of an unsustainable recent boom?

Guy Spier, managing partner of Aquamarine Capital, a Zurich-based investment firm that manages $160 million, uses his checklist to determine, among other things, how a company makes its customers and suppliers better off. That, he says, helps him figure out how likely the company is to be able to fend off competitors.